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There are around 900 systems operating in the UK and 40,000 franchised units. Those units employ approximately 600,000 people, and 90
What these businesses share is the concept of franchising – a company, often with a well-known brand, licensing others to operate under that brand using the tried-and-tested, marketing and business systems of the franchisor and with the benefit of
This, of course, does not come free for the
The immediate benefits are two-fold. Firstly, new franchise businesses are substantially less likely to fail than other small start-ups and, secondly, in recognition of that, the major banks will generally lend a larger proportion of the start-up capital than they would otherwise.Running a franchise is not, however, without risk. Franchisors are not immune to failure, no business is, and this, obviously, will effect their franchisees. Also, and almost without exception, franchisors require their franchisees to enter into franchise agreements that are drafted somewhat in favour of the franchisor. These agreements include clauses such as being tied in for the term and although the franchisee is given the option to renew at term end (usually five years) that is almost discretionary for the franchisor who can impose a different agreement upon renewal. There is also generally only one guaranteed renewal, so the term ‘maximum’ can be 10 years. (Although the franchisee agreement will be stated to be non-negotiable, always get it reviewed by a
These agreements include clauses such as being tied in for the term and although the franchisee is given the option to renew at term end (usually five years) that is almost discretionary for the franchisor who can impose a different agreement upon renewal. There is also generally only one guaranteed renewal, so the term ‘maximum’ can be 10 years. (Although the
Running a franchise is not, however, without risk. Franchisors are not immune to failure, no business is, and this, obviously, will
Provided that he or she complies with the procedures manual of the franchisor, the franchisee is his own businessman or woman but, increasingly, franchise agreements include performance clauses allowing substantial management from the centre, and even termination if the financial performance is not as the franchisor would want.
On the up
A good, well-established, franchisor gives much greater chances of success and is much less likely to abuse the extensive powers given to it by the franchise agreement. Further advice can be sought from the British Franchise Association (