Franchises are popular among business owners who want to run their own business but seek the security and brand awareness that comes with an established business.
However, it is important to seek advice before you decide to become a franchisee – allowing you to understand the obligations and costs you’ll be taking on.
What is a franchise?
A franchise is a way for an existing business (the franchisor) to expand and open new locations without having solely bear the risk itself.
Instead, an individual known as the franchisee buys the right to open their own business under the existing brand’s name for an initial investment.
The franchisor provides the franchisee with all the necessary tools, like the business model, training, and ongoing support. In return, the franchisee pays initial fees and ongoing royalties – usually a percentage of their earnings.
The main benefit for the franchisee is they get to start a business with a recognised brand and a formula that works, reducing the risk of failure.
The franchisor benefits by expanding their brand and receiving a portion of the earnings from the franchisee’s operations.
What advice do I need?
There are advantages and drawbacks to setting up a franchise.
To decide whether it’s right for you, it’s important that you get the right advice with respect to your legal obligations and rights as a franchisee, which may include:
It’s a good idea to seek this advice as early as possible in the process of buying into a franchise.
This business model can be rewarding but carries a number of challenges, including the upfront and ongoing financial cost. Knowing how to manage this and understanding your rights is a great way to navigate potential issues and ensure your business is successful.
For further advice on setting up a franchise, get in touch with our Company Commercial team.
