Ever thought about taking on a franchise?

Many may wish to take that step of running their own business without the experience or confidence of starting it from scratch. Taking on a franchise may then be the perfect solution to these concerns.

Firstly, you have the opportunity of actually weighing out the pros and cons of the particular business as it will already be in operation. The goodwill of the business will already be in existence and the system already in place. The only main concern of the franchisee will then be to assess the future success and continuing demand of the business together with their ability to step in and take control of it.

As you will be required to carry out the business in a manner acceptable to the Franchisor, a training programme on all aspects of running the franchise will undoubtedly be made available. It is also useful to make contact with existing franchisees and find out the true day to day dealings in a franchise and perhaps any indicators of pitfalls that could be avoided.

When you have decided that you wish to proceed, the following procedure may be of use:-

1. Identify the company that you wish to take a franchise with and the location you wish to have the business.

2. Obtain as much financial information relative to the franchise.

3. Secure approval in principal with a lender for the franchise.

4. Obtain a copy of the franchise agreement.

5. Arrange a meeting with your solicitor to discuss the terms of the agreement.

The franchise agreement will set out the procedures and rules governing the business operations. This should not only offer protection to the franchisor but also the franchisee.

The main principle of the franchise agreement from the point of view of the franchisor is to regulate the operation of the business and in the event of any breach of the rules governing same by the franchisee, provide appropriate procedures by which to enforce rectification of said breach or if necessary termination of the rights of the franchisee to continue the franchise.

From the point of view of the franchisee the franchise agreement should provide for training, advertising and general assistance in the operation of the business. It should also detail the rights of the franchisee to sell the business and any terms and conditions relating to such right, including any financial recompense that may require to be met by the franchisee to the franchisor.

Once the franchise agreement has been entered, parties will then focus on the lease that will require to be entered for the business premises. For information on the relevant considerations when entering a commercial lease you should refer to our article entitled "Commercial Leases - traps for the unwary".

It should also be noted that even when a franchise agreement and lease have been entered there will be provision for the franchisee to sell the business and assign their interest in the lease. Obviously depending on the strength of the business built up by the franchisee this enables the franchisee to thereby obtain financial recognition for their successful business. This is obviously the area in which the franchisee will have been given a head start by starting a business that has an established name behind it.

If this is a business opportunity that you consider may be worthy of more consideration then please contact either Morinne Macdonald on mm@macdonaldhenderson.co.uk or Philip Hannay philip@macdonaldhenderson.co.uk for a more detailed discussion.