All you need to know about becoming a franchisee in the UK

Whether becoming a franchisee is right for you depends on several factors, including of course the financial proposition, but also simply whether the model suits your own strengths, weaknesses and aspirations.

Every business venture involves some aspect of the unknown, but considered research and honest reflection should help you make the right choice. While every franchise is different, there are some common threads, and understanding these may help you decide if franchising is a concept that holds appeal.

The roles and responsibilities of the franchisee and franchisor

Let’s focus on business format franchises, which are the most common type of franchise for smaller investors. These involve a very close integration of the franchisee and the franchising business. That said, the exact division of roles and responsibilities would differ depending on the agreement you sign with the franchisor.

A Code of Ethical Conduct, administered by the British Franchise Association, specifies some obligations placed on both parties, but only applies to its members. It sets out 13 essential minimum terms of your agreement - in other words, the areas of your relationship that your agreement should clear up. In short, these are:

  • The franchisor’s rights
  • The individual franchisee’s rights
  • The goods and/or services to be provided to the franchisee
  • The franchisor’s obligations
  • The franchisee’s obligations
  • The terms of payment to the franchisor
  • The length of the agreement
  • The basis for any renewal of the agreement
  • The terms governing the sale of the individual franchisee’s business
  • The terms governing the use of the franchisor's signs, trade name, trademarks, etc.
  • The franchisor's right to adapt or change the franchise system
  • Provisions for terminating the agreement
  • Provisions covering the return of property that belongs to the franchisor.

Find the full list here: http://www.thebfa.org/about-bfa/code-of-ethics

If your agreement skips or glides over any of these areas, it’s important to seek clarification, or seek independent legal advice if you’re still unsure.

  • The franchisee

While there’s a lot of variation when it comes to the role of the franchisee, some concrete stipulations are made by the BFA. So, if the franchise you’re considering is a member, they should by abide by these.

In summary, as of 19 January 2017 the BFA states that the franchisee should:

  • Devote their best efforts to growing the franchise business and to enhancing its reputation and identity
  • Provide the franchisor with accurate data and give reasonable access to the business premises on request
  • Protect the confidentiality of the franchise business’ intellectual property and ‘know-how’, both during and after the agreement.

Consult the BFA’s Code of Ethics directly before making any commitments.

  • The franchisor

Created both to promote franchising and to raise standards within the sector, the BFA makes relatively stringent demands on franchising businesses. But remember not all franchises are members of this association and they are not under any legal obligation to join it.

If your franchisor is a member, it should:

  • Be the owner (or have legal rights to) a trademark or other distinctive brand identity
  • Have developed and operated a successful business concept for a reasonable period of time, including having trialled at least one pilot franchise before starting a network
  • Provide training and assistance, both at the outset and throughout the agreement.

For definitive guidance, see the BFA’s website .

Life as a franchisee

Franchises are generally considered a more secure way to start out in business compared with going out entirely on your own. You might find that life as a franchisee starts out relatively smoothly, as you should receive training from the outset and the business format should have been proven. Where applicable, footfall in your first few months should be less of an issue, as passers-by will know what to expect from your business.

On the other hand, no business investment is without risk, and franchise businesses can fail like any other. Franchisees have to be willing to work hard, and be comfortable with:

  • Following set systems and procedures
  • Dealing with changes to their business practices as decided by the franchisor
  • Accepting on-going scrutiny and dealing with feedback.

How to become a franchisor

Franchising a business can be an effective way to expand your operation, offering greater flexibility and a more favourable spread of risk than you’d have by simply opening more of your own branches. With day-to-day branch management handled by franchisees, the administrative overheads of a franchise are likely to be considerably lower than those of a company-owned operation. Overall, it can be a good way to secure investment (from franchisees), achieve rapid growth, and leverage greater economies of scale.

On the other hand, it’s not for everyone. If you want to become a franchisor, you’ll need a sustainable business model with a healthy enough profit margin to make franchising worthwhile (for both you and the franchisees). You’ll need a product or service that can be rolled out in new geographical areas, and a customer base that’s not dependent on loyalty to you as an individual and your own highly unusual skillset. You’ll also need funds to invest, people skills and all the qualities found in successful business managers in other sectors.

If becoming a franchisor would suit you and your business, it’s advisable to approach the BFA, starting with their step-by-step guide . It may be necessary to contact a franchise lawyer, as one of your obligations to franchisees is to protect your trademark or brand against unlicensed use.

You’ll also need to draw up detailed operations documentation, specifying your business model and what you’re offering franchisees. This could be drafted with the help of a franchise consultant, as could your training and support programme, which will need to be formally constructed.

Crucially, there will need to be a franchise agreement, which covers the areas stated above.

Once everything is in place it will be time to organise a pilot franchise to test and hone your ideas. Once everything is in place, recruiting franchisees (for example, online or at exhibitions) becomes your next big task, not to mention providing the initial and on-going support you promised at the outset.

Finding out more

A wealth of information is available online and at various franchise exhibitions   throughout the country.  Speaking to individual franchisees off the record is also a good idea, and it may be advisable to seek independent from advice from a franchise consultant if you’re unsure of anything.

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