A franchise can be a great business opportunity. They give the ability to purchase into and run a well known brand, they have an established supply chain and usually provide an the equipment and training to get a new franchise up and running. Given the extra resources available they can make an easier path into running a business.
However because it’s a franchise which represents a large brand, the agreement places higher restrictions on what you can and can’t do in the business, and your ongoing rights to run the business, than it would if you started and ran your own buisness. It also comes with a higher cost to run, as the Franchisor will require payments for the use of its branding, products and systems.
Franchise agreements are extensive documents which you should get legal advice on. Some important points to consider if you are looking at a franchise:
- What are the upfront costs, and what are the annual ongoing costs?
- Are you required to buy product directly from the Franchisor, and if so are their any caps on how the Franchisor can increase product prices?
- What is the length of the term of the agreement?
- is there an easy way to sell the franchise once it is running successfully? It is important in running any business is to consider what your exit strategy or succession plans are.
It is important in running any business is to consider what your exit strategy or succession plans are.
If you are looking at a franchise opportunity our Commercial Law team can help make sure your interests are protected and you maximise the benefit fom this business arrangement. Give us a call.
