Chambers & Co

If you are contemplating offering your business model as a franchise, you are in the right place.

In our ten years, we have advised over 200 businesses on becoming franchisors - more than most of our competitors. Some of these have realised their dreams, sold up and retired; many more continue as successful businesses. Many have won British Franchise Association Franchisor of the Year awards.

We have seen how new franchisors have developed over time, helped them over mistakes and through troubles and to maximised profits. This knowledge is now available to you - and this part is free.

Before you can launch Back to Top

These are the key things that you should do before you launch your franchise:-

• Prove the franchise system - not just that your business concept works, but that the concept can be properly franchised. Ideally you will pilot the franchise system through one or more arms-length pilots, although this may not always be necessary.
• Register your trademarks and any other intellectual property.
• Prepare a prospectus about the business which sets out your offer (the franchise package) very clearly.
• Prepare some financials which set out what the franchisee might expect to earn. Successful pilots are often essential as proof. Make sure you can justify figures or you may be exposed to substantial legal claims.
• Have in place an internal system to cope with supporting your franchisees from the start.
• Ensure that your business is legally compliant in every way, because it will be the template for the franchised business - particularly that:
  • data protection notification is current and that all the right notices are available;
  • the business structure will not fall foul of the Trading Schemes Act;
  • if the business sells a product or a service, there are good terms and conditions of trade already in place;
  • if the business provides services you have adequate service agreements between you and your customers;
  • employment contracts have been checked by an experienced employment lawyer within the last six months.
• Prepare all the necessary franchise documentation, and in particular the franchise agreement.

Using a consultant Back To Top

Many new franchisors should consider using a franchise consultant to ensure that the business concept is successfully cloned and the franchise package constructed correctly. Although Chambers & Co has considerable knowledge of these areas, an experienced consultant will have additional specialist experience, particularly on how to best sell those all important first few franchises.

You should choose your consultant carefully. There are only a handful in the UK with sufficient experience, so you should examine their track record carefully.

A good consultant will advise on the all important aspects of presenting the package to potential franchisees:

• Converting the business concept to a franchise proposition
• Constructing a detailed franchise package
• Structure and level of fees
• Presentation of earnings claims
• Strategy for recruiting franchisees

Our role as legal adviser Back To Top

Because we have experience of a large number of launches, we can offer a package of advice, at a price fixed from the outset, to provide all of the legal advice that you will need to take your franchise to market. While most lawyers will talk only about the franchise agreement, there are other important issues to consider:

• Structure of the franchise: Should you have a separate franchise business? What is the relationship between your business, the franchisee, and the customers? How does cash flow around the network?
• 'Ownership' of customers; ring fencing of liabilities.
• Ownership of the intellectual property to be used in the franchise, which is usually at the very least the trademark and the franchise system.
• What degree of control can be exercised by you exercise over your franchisees? The more thought that is given to this, and embodied in your structure and reporting systems, the less you will need to rely on the franchise agreement and lawyers in the future!




Some frequently asked questions
Back to Top

1 Why do I need to register my trademark?

Answer: To add value to the business. Unregistered trademarks may only be protected by their owner in the immediate geographical area in which they are commonly used. A registered trademark can give protection right across the country so your franchisees can be certain in using it.

2 I have some existing licensees. How do I upgrade them to franchisees?

Answer: Existing licensees can be an effective pilot. You would usually offer licensees the chance to "upgrade" to the franchise, usually at no extra cost, although the licensees may have to meet performance targets in order to upgrade.

3 I am concerned about franchising because slippage in quality control could damage the whole business.

Answer: This is a common concern, but need not be. Although franchisees are independent (and often very entrepreneurial) business people they would expect to be subject to a high degree of quality control. You can define all the quality control procedures that you wish, through training, the operating manual and the franchise agreement. Your franchisees' income depends on producing the highest quality products or services, so they have more incentive than most employees to get things right.

4 What fees do I charge to franchisees?

Answer: Most franchisors charge an initial fee, which will cover their costs of recruitment and training, deferral of costs in compiling the franchise package, and a licence fee element. They would then take an ongoing income such as a percentage of the franchisees' sales in return for providing ongoing support. There may also be a mark up on products supplied to the franchisee.

5 I already know a bit about franchising and have drafted the franchise agreement, partly on the basis of one I have used before. Will this reduce my legal costs?

Answer: Possibly. With most experienced franchise lawyers, the costs are not so much in drafting details in franchise agreements, but in providing overall advice about the structure of the franchise, controls and the other elements described above. Properly prepared franchise agreements that might save time are not usually in the public domain. Frequently it will take a lawyer longer to correct a poor draft than to prepare an agreement with a clean sheet. But we are always willing to look at such agreements and give you an honest opinion.

6 Is my business franchiseable? I want to just dip my toe in the water.

Answer: There are many tests for "franchise-ability" - some quite subjective. Most consultants (and lawyers) would agree however that - at minimum - you need to show that the core business is adequately tried, tested and proven; that there will be sufficient trading margins for both you and your franchisee to make a profit; and that there is enough substance to the franchise for the franchisee to make it a real business, i.e. that they are not just buying a job.

This is a very tricky area and, if you have got to this stage and are still not sure, we would be happy to discuss this with you. Just call John Chambers.