Franchising is a process that many businesses go through. Typically, it involves the ‘franchisee’ buying into an existing brand and setting up a business that operates under an existing trade name.
The process is often quite complicated and, depending on which type of agreement you choose, it can also be quite costly. This is why it is so important to get really specialist franchise legal advice from expert solicitors to help you with the process and make sure you get the right agreement. Read on to find out about the three main types of agreement your franchise solicitors will be able to help you with.
The type of agreement that is often most suitable for companies is a business format. This can be beneficial as it gives new franchisees a ready-made model to work from. They buy goods from the parent franchisor and then sell them on under that brand name. Alternatively, they can offer services depending on the nature of the business. There will normally be an initial fee up-front to buy into the brand and then royalties might also have to be paid to the parent company – this is something your franchise solicitor will be able to explain in more detail.
In the retail industry in particular, it is also common for distribution agreements to exist. This is where the franchisee is given a range of products to sell under the existing trade name and branding of the parent company. This is the model that is adopted by retailers such as The Body Shop and Specsavers; all their shops are under the same brand name but are effectively run independently.
There is also a manufacturing agreement. This allows franchisees to make products under the trade name of the original franchise and is commonly found in the food industry. Again, this type of agreement usually requires a fee to be paid to the parent business, but this is likely to depend on how much of the product is actually sold. The parent business also normally takes most of the responsibility for the marketing of the product and sales often rely on its reputation.
Franchising can be very complicated, especially if it’s something you have never done before or you are unsure which type of agreement would be best for you and your business. It’s vital that you talk to get the right franchise legal advice from specialist franchise solicitors to make sure that not only is franchising right for you, but also that you have chosen the right type of agreement that will benefit the parties on both sides of the deal.