In this video, Wills and Tax Specialist Lee Young looks at the different types of LPAs, whether you need one and what to include.
Some of the best-known brands in the UK use a franchise model as their means of expansion, with great success. UK franchising today is extremely diverse, encompasses a multitude of business types and consumer markets and is well-established as a successful growth model.
Franchising enables fast and cost effective growth of a business and brand. It can generate better results per outlet than expansion by the owner, as each outlet has a franchisee to focus on the growth of their own particular store and market. At the same time, it offers economies of scale in the bulk buying power and reduced production costs and strength in terms of sources of ideas, best practice and synergy.
As with all business arrangements, it is crucial to get the terms under which a franchise operates agreed in a formal contract. Franchise Agreements can be highly complex and often relate to a huge financial investment. The time spent at the outset to get the model set up correctly, is vital for successful future growth.
Before reading on, find out more about what franchising is, and the pros and cons, here.
Obligations & rights as a franchisor and also a franchisee
Your franchise agreement should set out the obligations of you, as the franchisor, as well as your rights. It should be equally clear in explaining the rights of the franchisee and their obligations.
That does not mean that franchise agreements are an equal balance of rights and obligation between equal business partners. Franchisors are responsible for the network as a whole, which sometimes means acting against the interests of an individual franchisee for the greater good of the network.
There are only a limited number of commercial solicitors that have the right blend of experience and knowledge to advise on the complexities of business franchising. Lack of quality legal advice is often cited as a reason for new franchise business failing. If you don’t seek professional advice from a commercial solicitor you could end up paying far more in the long run, when a dispute occurs and you are not adequately protected.
Karen Edwards, Solicitor and Associate in the Commercial Team, has specialist experience in franchise agreements. She says “Franchise agreements must be fair and comprehensive. They are not sales brochures and there is not one standard document that fits any business. As such, a good agreement may stretch to forty plus pages. Franchise agreements have gone through more than twenty years of development to ensure that franchisors have the appropriate rights to do their job within a framework of fair and reasonable treatment for franchisees.”
Our Commercial Team is happy to discuss any issues that this raises for your own business. If you have any questions, you only have to ask us at Frettens. Please call 01202 499255 and Karen or her team will be happy to chat about your situation and your particular requirements.
