So you have decided to explore becoming a franchisee?
Before entering/signing a franchise agreement, there are several key things in your journey to becoming a franchisor:
- A good place to start is the British Franchise Association. Their website has various articles which can assist you in the journey to becoming a franchisee. There are various franchising shows such as The British & International Franchise Exhibition (next one is in February 2025 in London) where all manner of franchisors will be in attendance.
- Once you have selected a franchise that you are interested in, you should speak with existing/current franchisees of the franchise you are interested in. Many franchisees encourage their prospective franchisees to speak with their existing franchisees. This will allow you to get a greater feel for the franchisee
- Once you are comfortable with the franchise you have selected, you be required by the franchisor to go through a vetting process and, for some of the more established franchisors, this can be quite onerous.
- If you are successful in your application to become a franchisee, you should then consider how you are to become a franchisee.
- Are you buying a fresh franchise or an existing franchise as a resell from an existing franchisee?
- If you are a buying an existing franchisee, is that franchisee a sole trader, partnership or limited company? If you are buying from a sole trader, then you will be acquiring assets from that franchisee. Where the franchisee is a limited company, it might be that you are acquiring various assets from the franchisee, or you are acquiring the shares of the franchisee. If you are acquiring shares of the Company, additional careful due diligence will need to be undertaken as you are acquiring the Company warts and all. If you are acquiring the assets of the business, you might be able to acquire the assets you need and leave the Seller with those assets you do not wish to acquire. Any contracts the franchise has with its supplier and customers will need to be novated from the Seller to you, the Buyer.
- Are you incorporating a Company to acquire the assets/shares of the Seller? Who is going into business with you? We can assist you in forming the Company to make sure that it has appropriate articles of association and, where there is more than one shareholder, an appropriate draft shareholders agreement. It is worthwhile noting that some Franchise Agreements stipulate those individuals who can hold shares in a Corporate Franchisee.
HSR can assist in your journey to becoming a franchisee
From reviewing any heads of terms, to negotiating the franchise agreement (but please bear in mind that some franchisors will not accept amendments to it and it such instances, we can advise what the terms mean so you can decide whether the agreement is appropriate you).
You also need to consider where you are to trade from. It may be a requirement of your chosen franchisor that you have are to trade from physical premises. In this eventuality, have a dedicated Commercial Property team who can assist in negotiating the terms of your new lease or acquisition of the property you that will form part of your franchise.
Our property team can also include the recording a licence for the scope of works with a landlord and/or franchisor.
We can also introduce you to other Business professionals such as an accountant, finance partners and insurance brokers who understand the nuances of franchising.
About HSR Law and how we can assist you with your franchising requirements
HSR Law has a dedicated Company and Commercial team comprising 5 fee earners who are ready to assist you with your franchising requirements. However, our clients come from the length a breadth of England and Wales.
We handle matters for both Franchisors and Franchisees, and our niche is acting for small to medium sized franchises and franchisees who anticipate their turnover to be less than £2m per franchise.
We have a dedicated team of 5 colleagues working within our Company and Commercial Team, who spend time to get to know you and your requirements so we can best advise accordingly.
We are small enough to care, but large enough to cope.
Your New Franchisee Team
Our recent cases have included:
- Acting for the franchisees of a large property franchise looking to dispose of their territory and negotiating the terms with the Franchisor and the Buyer.
- A franchisee looking to acquire further territories from an existing franchisees and the most appropriate route to acquire the business.
- Selling a non-franchised business to a franchised business, which included a deferred payments subject to clawback.
- A sale of a Corporate Franchisee to an existing franchisee via a sale of the entire issued share capital. This included careful negotiation around the free cash within the business and working with the client’s accountant.