Up next in his franchising series, Business Advice expert David Burton tells readers why it’s vital to ensure franchise agreements are legally secure, and the measures owners can take to ensure their brand is protected.
When it comes to franchising your business every step is important, but none more so than ensuring you are safe and covered legally.
Having built your business to its current success, you are ready to take the step into franchising and the last thing you want to do is undermine your hard work and efforts by not having protected yourself properly.
First things first – do not cut corners on costs. Legal advice is not cheap and it would be easy to think that this is something you can do fairly low-cost now and maybe revisit later. That’s the wrong approach. Investing in good quality legal advice to prepare your franchise agreement by experienced solicitors is essential.
Although the initial outlay may be expensive, any disputes that arise later will be a lot less costly both in terms of legal costs and brand protection. If a franchisee does something that damages your brand reputation or attempts to make off with your brand knowledge, it will be easier and less costly to enforce the terms of the franchise agreement if you have invested the resources initially, and the terms of the agreement are clear and leave little room for challenge.
The primary document you will need to have in place to protect your rights and your brand is the franchise agreement.
In a nutshell, the franchise agreement needs to protect your brand, know-how and your expanding franchise network. The agreement is usually weighted in favour of the franchisor (you) but this does need to be balanced and can’t be too one-sided.
The agreement, whilst weighted slightly in your favour, should still be fair, reasonable and enforceable. There is little point in having an agreement that when challenged is found to be unenforceable, as this would be the undoing of your entire franchise structure.
This brings us back to seeking good quality legal advice, which will give you the balance between protecting your rights, being fair yet still enforceable.
Protecting your intellectual property (IP) rights in a franchising context is of particular significance, as you will need to protect your know-how and brand.
Within the realm of IP, trademarks are of the greatest significance because of the importance of brand names and image. A trade mark, according to section 1 of the Trade Marks Act 1994 is “any sign capable of being represented graphically” provided that it is “capable of distinguishing the goods or services of one undertaking from those of other undertakings”.
Therefore, you need to make sure that you have the requisite legal protections in place to protect your IP rights and particularly your trademarks, including ensuring the registration of your trademarks.
Investing in good quality legal advice also means finding someone who specialises in franchising. Their knowledge and experience of franchising will be of paramount importance when advising you and some aspects of franchising will be alien to a solicitor not experienced in this area.
The British Franchise Association (BFA) provides a list of solicitors with specialised experience in franchising, from franchise agreements to litigation. This is a good place to start when looking for legal advice specific to franchising.
Missed the previous article in David’s franchising series? Catch up here and read Franchising A-Z: Keeping a relevant franchise
Sign up to our newsletter to get the latest from Business Advice.