5 Top Tips To Avoid Potential Franchise Disputes

12th March 2019 by

Starting a franchise can be an exciting business opportunity. As a franchisor, establishing a franchise network can be a rewarding way to expand a successful business in the UK and abroad. As a franchisee, purchasing a franchise allows for the chance to manage a business with the security of an established brand and the support of a client network.

Should a dispute occur however, the financial consequences and damage caused to the franchise relationship can be severe. A dispute will cause significant disruption to the rest of the franchise network and will carry serious financial implications to the franchisee. Fortunately, many franchise disputes can be avoided relatively simply and cost-effectively if both parties fully understand their role, and the franchise itself.

The following 5 top tips will help you avoid potential disputes:

1. Make sure you understand what a franchise is

Arguably the biggest cause of franchise disputes is misunderstanding about what a franchise actually is. There is a misconception by many that becoming a franchisee will enable them to run a business as their own. In reality, most franchises are standardised products or services, and it is rarely possible to exercise much entrepreneurial flair. Conversely, some potential franchisees may be unaware of the responsibility involved in running their own independent franchise business, imagining instead a situation closer to managing a regional branch of a business. These misconceptions will cause significant problems to the franchise agreement if they are not dealt with at the start of the process.

2. Manage goals and expectations

Another cause of disputes is miscommunication, and a discrepancy between what each party wants and what they can actually achieve within the franchise agreement. Whilst a franchisee owns the business and is the party whose assets are at risk, much of the control of the business remains in the hands of the franchisor, who controls the direction of the business and aspirations of the brand, and will make decisions regarding how any changes are implemented.

3. Communicate

It is important that roles undertaken by the franchisor and franchisee are defined from the outset, and that mutual goals are well understood. Goals relating to new business and financial projections should be agreed upon in advance, with levels of training and support provided by the franchisor clearly set out

4. Research and take your time

Successfully franchising a business is not something that can be done overnight; so take your time! Make sure that you thoroughly research the viability of the franchise concept, and that all necessary infrastructure is adequate and in place.

5. Seek advice

The start of a franchise agreement is a time of evolving relationships and exciting developments. It is possible to get caught up in the process without pausing to reflect on whether this is actually right for you. Many people are reluctant to raise awkward questions in initial discussions, hoping instead that certain issues will be addressed in due course. This will likely simply defer problems to a later date, and being proactive in this regard will benefit both parties in the long-run, and save considerable time and money. Make sure you seek advice from specialist advisors when it comes to funding, financial projections and legal matters.

Healys Franchise team can advise on all matters relating to starting a franchise. Please contact one of the team on 020 7822 4000, or email franchising@healys.com