USING YOUR IP KNOW-HOW POSITIVELY

Brand expansion – Is franchising for you, either as a franchisor or a franchisee?

At the Future Trends Seminar Forum at Spring Fair, NEC earlier this month, ACID explored the world of franchising with leading UK experts, Tim Bowyer, Director of Franchising, The Royal Bank of Scotland, Tom Bridgford Head of International Franchising and Patricia Jones, Head of IP at Hammonds, one of ACID’s Accredited law Firms.

So how does franchising fit in to your business model and is it right for your company?

Franchising allows a business with a successful product or service (the franchisor) to let other businesses (franchisees) operate under their brand in return for payment (royalty). Look at Macdonald’s - a classic example of taking a successful product, in this case the sale of hamburgers, sitting under a successful and distinctive brand. By using intellectual property (trade marks, copyright and know how), together with guidance and training this has allowed many franchisees, who pay a fee, to grow the business for Macdonald’s into a world-class example. Whether you like Macdonald’s hamburgers or not you have to agree that the business recipe has been a success!

The right franchisee is usually highly motivated and can bring new ideas and energy to the business relationship. They will invest their time in developing your brand and will take most of the risk. Because of their investment into the franchising relationship they will be committed to making it work and developing your brand.

To consider becoming a franchisor, key components of an agreement include a precise description of ‘The system’, i.e. exactly what is being licensed. Consideration should be given to the scope of the license i.e. what kind of outlets - which territories - via the internet - and whether this is an exclusive arrangement. Quality control and a comprehensive operations manual are key to any successful franchising operation, together with clear rights of termination i.e. how to end the relationship if it doesn’t work. Other vital considerations include how the fees and payment terms are managed and where funding will come from to develop a franchising strategy for brand expansion.

An enthusiastic Tom Bridgford of Hammonds explained to delegates, “Our franchising clients have experienced strong growth in recent years…one client has grown from nothing to 45 franchisees around the world in less that five years – a phenomenal success story”

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Tom Bridgford, Dids Macdonald and Patricia Jones

Patricia Jones outlined the importance of intellectual property protection and summarised by saying ‘To the outside world, the franchisee and the franchisor are the same in that the franchisee uses the franchisor?s intellectual property i.e. know-how, brand and/or designs. By getting your IP house in order (with registered trade marks and registered community designs) you ‘own’ your brand or product and, therefore, have control about how it can be used, by whom and who takes responsibility if those rights are infringed. Successful franchises naturally suffer from copying but with registered rights it is much easier to pursue any infringements and there is also the potential, through registration, of indefinite exclusivity’.

Patricia used several examples of franchisors whose strength lies in trade mark and design registration including Bang and Olufsen whose brand strength lies in its cutting edge design integrity and precision engineering and technology.

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With a wealth of well known franchise systems relationships under its belt, including McDonald’s, Toni & Guy, Kall Kwik, Spar, Vision Express to name a few, RBS’s (Royal Bank of Scotland) Director of Franchising Tim Bowyer outlined the reality of following a franchising route - ‘Franchising is no quick fix for brand expansion but with help from experts who have a track record in successful franchise operations, there is every chance of real success’. Key to the RBS’s role in this sector is knowledge and established relationships with franchisors and professionals within the industry, ‘We also have a national franchise team dedicated to helping franchisors and franchisees. This capability backed by bundled funding, credit ‘intelligence’ and corporate and commercial structured finance on leverage transactions can provide a comprehensive menu of support offering the right options. RBS are also experienced in the assessment and feasibility underpinned by credit assessment, sector information, training and financial analysis’.

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Tim Bowyer

Following the successful seminar and positive feedback, the ACID team has decided to run this seminar again. Any interested parties should contact Jane Stephenson, ACID’s Membership Development Manager janes@acid.uk.com or telephone 0845 644 3617.

Tim Bowyer, Director of Franchising, Royal Bank of Scotland
Tim.Bowyer@rbs.co.uk
Tom Bridgford, Partner, Head of Franchising Group, ACID Accredited Law Firm, Hammonds Tom.Bridgford@hammonds.com
Patricia Jones PhD, Partner specialising in contentious and non-contentious Intellectual Property, ACID Accredited Law Firm, Hammonds
Patricia.Jones@hammonds.com

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