Franchising Layerslider

Franchise Agreements

The basic premise of a franchise agreement is that the franchisor who has invested time and capital in creating and developing a brand continues to own all the intellectual property and will prescribe certain operational standards based on which the franchised business is required to operate. As there is currently no law specifically regulating franchising in the UK, getting a franchise agreement right is critical.

At MKB Law, we advise both ambitious franchisors looking to expand their brand and networks, and also aspiring franchisees looking to capitalise on an already established brand and market. Our Property Team can also advise on all property related matters in your franchise venture.

Our specific areas of focus include:

Initial setup of the franchise package to include drafting a franchise agreement and reviewing the operational manual

Trademark registration

All commercial property related matters (to include commercial lease)

Licensing, to include liquor licence

What We Do

At MKB Law, we take the time to understand the needs of your business. Our Corporate team offer tailored and strategic advice and work with you to maximise the value of your IP assets and brand network. We pride ourselves in our ability to provide clear, concise and pragmatic advice and support with our client’s best interests at the heart.

As a full-service firm, our clients will benefit from diverse experiences and expertise across our multi-disciplinary teams and our well-rounded approach to our offering to ensure optimum outcomes for our clients and to help them achieve their goals.

What are main issues in franchising?

When considering exploiting your brand through franchise model, there are principal issues that you would need to consider which are highlighted below:

  1. What rights are granted
  2. Is the franchise to be exclusive or not? Commercially this may be unobjectionable; however, exclusivity can only be granted in the EU subject to conditions (below)
  3. The territory. Additional considerations (relating mainly to business practice and dispute resolution) apply where the franchise is in a different country to the franchisor
  4. The term. Five to ten years is typical, often longer in overseas arrangements. Renewal must be considered
  5. What sales targets and franchise development schedule are appropriate
  6. What trademarks and other intellectual property rights are to be licensed; and
  7. The parties’ obligations, notably:
    • the franchisor—provision of training and other support, regular monitoring and assistance to the franchisee, updating the manual, availability of key supplies, and
    • the franchisee—hiring suitable personnel, effort devoted to the franchise, compliance with the manual, keeping records and making payments
  8. The franchisee often has very limited scope to negotiate the terms of the agreement, particularly with well-known franchises. Overseas, the franchisor may be more dependent on the franchisee and the latter’s negotiating power greater
  9. The manual which contains the know-how of the franchised business, and sets out performance standards which normally cover the following matters: staff qualification and presentation and employment matters, customer service standards, complaints procedures etc., pricing, premises layout, opening hours, stock and technical requirements, advertising and marketing and accounting.

I am considering entering into a franchised business as a franchisee, but am told the franchise agreement is applicable to the entire franchise network and cannot be varied?

Although the franchise agreement is a standardised document and terms contained therein will be applicable to all franchisees of a franchise network, it is recommended you consult a solicitor before you sign a legally binding franchise agreement. Your solicitor will review the terms of the franchise agreement and ensure that you understand your various obligations under the agreement, including financial, technical and legal obligations as well as other restrictions and covenants imposed upon you during the term of the franchise and beyond.

I have a brand and there is a market for it but I don’t yet have sufficient resources pay for legal costs in establishing and maintaining a franchise network. Is there any other way to commercialise my brand?

Depending on the specific circumstances of your business, we could work with you to set up a licence agreement whereby you grant a licence to a licensee to use your brand in the operation of licensee’s business in consideration for the licensing paying you on-going licensing fee. The different here is that you, as licensor, would not have control over the operation of the licensee’s business as you normally would if you were a franchisor.

Gordon McElroy
Director
gmce@mkblaw.co.uk
028 9099 3111

Maria Conway
Director
mc@mkblaw.co.uk
028 9099 3115

Lynsey Henderson
Solicitor
lh@mkblaw.co.uk
028 9099 3117

Jose Lazaro
Solicitor
jl@mkblaw.co.uk
028 9099 3114

Wattey Kemnay
Legal Executive
wk@mkblaw.co.uk
028 9099 3153

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