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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.

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