Setting Up a Franchise

Franchising is an extremely popular means for a business to exploit the commercial opportunities arising out of a particular concept without having to retain day to day control of the management of the business. Examples of this are Mcdonalds, The Tanning Shop, Pontaprint etc.

If you wish to become a franchisor, your role will be continually developing and improving the system and monitoring the franchisees to ensure the high standards of the system which you have developed are maintained.

A franchise has the following elements:-

  • The franchisor allows the franchisee to use the name which is associated with the Franchisor
  • The franchisor provides advice to the franchisee
  • The franchisor retains control over the franchisee
  • The franchisee has to make periodic royalty payments to the franchisor.

We would normally recommend that you operate the franchise as a limited company, as it has a limited liability status which is separate from your own personal liabilities. As a Franchisor you will need to arrange and run a carefully structured training programme which would include the use of the software which you utilise for running the company. There should also be appropriate auditing provisions to enable you to properly assess and check that the correct levels of royalties are being paid to you as a percentage of the turnover figure. You may need to assist the Franchisee in the lease of appropriate premises.

An Operations Manual will identify the know-how of the franchise and is very significant. The manual in itself allows franchisees to use the know-how and helps to protect the franchisor by both identifying the trade secrets and providing copyright protection for the way in which the know-how is expressed. Examples of the type of matters this includes are; grievance procedures, staffing requirements for each outlet, training procedures, pricing, auditing, and accountancy procedures.

You will need to consider registering your trademark and any accompanying logo as a trademark. We can perform a search to see whether it has been registered and consider which territories require trademark protection. Protecting your Intellectual Property Rights is essential to ensure that no one else is able to exploit these rights.

We have advised clients who are involved in franchising on the following types of agreements and advice:-

  • Franchise Agreements
  • Complete legal advice package for franchisors and franchisees
  • Confidentiality Agreements
  • Advertising Agreements
  • Operations manuals
  • Intellectual Property advice
  • Employment Law Advice
  • Legal Proceedings and Dispute resolution
Justin Selig
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020 7898 0585