Franchising

In December 1827 the American author, Charles A Goodrich coined the motto which is now popularly quoted as "a place for everything and everything in its place". In doing so he was merely drawing on the pre-existing idea that there is a natural order and size for everything and to go against that order is to invite trouble. So as we search the universe for Goldilocks planets which are neither too hot nor too cold and therefore may sustain life, we hear tales of dinosaurs being too big for their own good and understand that giant vegetables grown for competition may not be the best to eat.

The same is true in business. The BBC television programme Dragon's Den regularly features individuals who are commended for their idea but rejected as the business is not scalable. In fact, the commonest causes of business failure include expanding a business too fast or attempting to expand beyond a natural size. The step up from individual entrepreneur to multi-site business is not an easy one and many fall along the way.

When considering business expansion one option which is far too frequently ignored is that of franchising. Bringing your business or idea to the market place by way of a franchise can enable the business and brand to expand rapidly without the attendant cost and staffing implications. Although the British Franchise Association (BFA) warns that not all businesses are suitable for franchise, the franchise model does work for a far wider range of business types than mere coffee houses or stationary providers.

Successful business franchises are based upon a robust business model supported by a comprehensive franchise contract. Whilst franchising brings many benefits, the franchisor is partially handing over their reputation and their brand to others and this can have implications for the business as a whole. In a global 24/7 marketplace the actions of one franchisee will reflect on the franchisor as well as the other franchisees and therefore the franchise contract needs to cover every conceivable eventuality.

This means that a franchise agreement cannot be written on the back of an envelope but will require specialist franchise contract review advice from a franchise solicitor. In fact, those who specialise in franchise agreement reviews need to not only have a deep understanding of the law as it applies to franchises but also a strong grounding in business processes. This enables franchise solicitors to take account of all the nuances of a particular franchise; and those looking to set up a franchise or become a franchisee ignore specialist franchise contract advice at their peril.

Whilst this may seem like a doom laden warning, the truth is that it is only when something goes wrong that the true nature of an enterprise is revealed. Good franchise agreements are as much designed to pre-empt trouble as they are to act as a rule book. So, potential franchisors should take specialist finance contract advice and potential franchisees should also commission a franchise solicitor to undertake a franchise contract review.

These franchise agreement reviews are vital in ensuring that the franchisee is fully aware of their obligations under the franchise contract.

From a franchisor's viewpoint the potential to be gained by way of rapid business expansion, income growth and the spread of risk is a heady mix. Similarly a potential franchisee can easily succumb to the temptation of an existing business model, strong brand and business support from the franchisor. But unless an in depth franchise agreement review has taken place both parties may be simply stepping into the franchise arrangement with their eyes shut.

Perhaps that is why franchise solicitors are often asked to mediate or advise on franchise disputes. These often arise when the original franchise agreement review has not ensured that franchisor or franchisee fully understand the nature of their obligations under the finance contract. Franchise contract reviews are also required on an ongoing basis to ensure that the franchise contract continues to meet the requirements of an ever-changing business world.

Whilst there are those in the business world who are content to remain a "one man band"; for many the drive to expand, to build, to secure is part of their business DNA. Those who take the franchise route have the potential to successfully take their business far beyond the natural size for a single outlet. By spreading risk, injecting capital from franchisees, taking advantage of bulk buy-discounts yet minimising staffing levels the successful franchise has the potential to be a global enterprise. So maybe we need to modify Goodrich's motto to read ""a place for everything and everything in its place, unless you franchise".