HAVE YOU THOUGHT OF FRANCHISING?

Franchising remains a popular way for brands to grow. Whilst ACID’s main focus has been on intellectual property protection, one of the organisation’s other key objectives is to ensure that IP is viewed as a positive force and fully utilised to commercialise and leverage a brand’s full potential. One of the most lucrative ways to extend a successful brand is to consider franchising. Last year the franchising industry grew twice as fast as the UK economy, according to a recent survey carried out by Nat West and the British Franchising Association.  Turnover in the sector has grown ten-fold since the 1980s to nearly £11 billion.

Dids Macdonald, ACID’s Chief Executive talked to Tom Bridgford, Head of Franchising at ACID’s accredited law firm Hammonds who explained that, “A franchise is a business method in which a firm which already has a successful product or service (the franchisor) allows other businesses (franchisees) to operate under the franchisor’s brand.  The franchisor provides intellectual property, know-how, training and guidance.  In return, the franchisees provide fees, royalties, an advertising levy (for the franchisor to re-invest in advertising the brand nationally), but above all, the will to expand the brand’s reach”.

So why is franchising so popular?

Franchising is a tried and tested way of doing business which allows brand owners to grow their businesses with relatively low capital investment.  It offers the opportunity to secure distribution for products or services faster than would be the case if the franchisor had to train its own employees and develop its own internal organisation.  Moreover, as franchisees are usually investing their own money, they are normally very committed and motivated to grow the businesses aggressively.The numbers speak for themselves.  The respondents to the Natwest/BFA survey showed 93% of franchisees reporting profitability and 82% of franchisors forecasting an improvement in their business.

What are some of the the benefits?

1)   If you wish to create additional outlets, franchising will enable you to expand by allowing others to finance and manage their newly created franchise

2)   In return you receive franchise “fees” or you can negotiate a mark up on what is sold

3)   A franchisee will run the outlet themselves, therefore releasing you from further management

4)   The more successful a franchisee becomes, the more your brand will become known so that you can capitalise on growth and development opportunities

5)   The more successful a franchise becomes, the greater the opportunities are to create possible savings through increased purchasing power.

What are the watchpoints?

Most importantly, a franchisee is only as good as the support, encouragement and motiviation you provide. A franchisee who does not represent yours and the brand’s best interests will have a detrimental effect on the brand’s credentials. Always ensure that regular, positive, communication channels have been established. Investment in developing and marketing the franchise is key, as are the franchisees that you select. so ensure that you have a strict criteria which you apply when vetting potential franchisees. Unless there are continuity of standards and service delivery within the franchise, there will be inconsistency, therefore the creation of your operations manual is important communicating the minimum standards to which the franchisee must adhere. Regular checks are an integral part of maintaining your standards. If you have not set up an IP audit or health check of your intellectual property rights before setting up a franchise operation, you run the risk of leaving your brand’s protection open to challenge. Always consult an IP specialist or an organisation such as ACID to advise on your legal protection for any trade marks, copyright, design rights or patents.

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