Post on 26-May-2015
K2 Business Rescue The Emergency Service for Business
Call Tony Groom on 0844 8040 540
The journey for every business is different. We listen to you and your objectives before proposing a plan for survival and growth. We work alongside you and your team and focus on protecting and improving your wealth.
Published on 23 May 2011by Tony Groom
Franchising Can Be Great if You do the Research and Check the Small Print
Many people dream of owning their own business and in the current economic
climate are finding themselves pitched into starting up thanks to redundancy
perhaps before they are quite ready.
A franchise often comes with an established brand, support in the way of training,
promotional materials and advice so it is tempting to see buying into a franchise as a
safer option than going into business completely independently.
But anyone considering sinking their savings or their redundancy payment into any
kind of business is taking a risk and a franchise is no different. There are several key
things to remember.
Most important is that while the franchise provides support, it may also impose limits
on independent action in order to protect its brand and reputation. Its primary
purpose is to make money for the owner of the franchise operation. The most
successful franchises will have tested their business model and methods and
incorporated these into the package offered to franchisees.
It can happen that a franchise has failed because the franchisee has failed to follow
the advice and gone off in their own direction. Any individual franchisee is still
effectively an independent business owner and has a responsibility to make sure they
understand the fundamentals of the business and are confident that those can be
met and maintained.
The big danger in taking on a franchise is getting a false sense of security that
someone else is responsible for your business. This means that a business plan is as
important for a franchisee as for an independent trader.
K2 Business Rescue The Emergency Service for Business
Call Tony Groom on 0844 8040 540
In a recent case of a franchise business in difficulty, a business rescue company was
called in to help a parcels delivery company. One of the biggest issues was that the
franchisor declined to take any legal steps to protect its intellectual property or the
rights of its franchisees. A consequence was that people then believed it was fair
game to ride roughshod over the franchise terms.
The franchise model offered complete geographical coverage and each local
franchise unit’s success was therefore dependent on the efficiency of the whole
network. As individual units began to fail that offer could not be guaranteed, thereby
damaging the reputation of the others and the brand as a whole, but also people
who had gained privileged knowledge within the franchise could then go and set
themselves up in competition.
Equally essential when setting up a business, therefore, is scrutinising any legalities
required of the franchisee.
There is nothing in UK legislation that requires any franchisor to operate to a particular
standard in offering franchises for sale. The British Franchising Association is a
voluntary self-regulating body for the industry and can offer a great deal of useful
advice and guidance, but essentially the only way for a franchisee to protect
themselves is to carry out due diligence. It is very difficult for a franchisee to take a
franchisor to court for being misleading or negligent.
Any franchisor will present a potential franchise buyer with an agreement or contract
and it is easy to assume that this is a legal document whose written terms are
absolute and cannot be changed. However, before signing up to anything it is
better to assume the terms can be changed and take legal advice, then challenge
anything that the buyer is unsure about. If they are still uncomfortable then they
should not buy into the franchise.
So the essential message to anyone considering buying into a franchise set-up is that
yes, it can be a very good business opportunity but it does not eliminate much of the
risk inherent in setting up a business and the same preparation work must be done as
for any business start-up.
We are not Insolvency Practitioners. We operate within the law to protect our clients and their wealth. Our team has worked for over 20 years to help stabilise and return hundreds of businesses to profitable growth. Once appointed, Insolvency Practitioners do not work for you, they work for creditors and use your company’s assets to pay themselves. We work for you, not creditors.
More Free Resources for Directors and Business Owners in Difficulty
K2 Business Rescue The Emergency Service for Business
Call Tony Groom on 0844 8040 540
www.rescue.co.uk
We Save Businesses We provide experienced advice to directors
We negotiate with HMRC and creditors We are on your side
Need Immediate Help – Call Tony Groom on 0844 8040 540