BEFORE you buy a franchise, know your rights.
'Buying a franchise is not like making an investment or buying a job, and there is no 'money-back' guarantee,' says Cathryn Hayes, head of franchising at HSBC. 'You are starting a business, and that involves risk.' As a franchisee, you are selfemployed, so rights which apply to employees will not extend to you.
Franchising is not governmentregulated, and even though you ‘buy’ a franchise, the laws that protect consumers and investors are not intended to cover you, either.
In fact, the only rights you have are those set out in the contract between you and the franchisor, so check it carefully to ensure you are getting a fair deal.
‘There is no “model” franchise contract. They vary among franchises and over time,’ says Tony Urwin, of franchise consultancy Franchise Development Services Northern, who looks at ten to 15 new contracts a year.
A good contract should cover these issues:
Set-up help. The franchisor should help you with supplies, services and equipment, and any shop or vehicle-fit.
Training. The right to be taught the franchisor’s proven business systems and methods.
Help with initial marketing and promotion.
An operations manual of procedures for running the business.
Ongoing support, advice and encouragement from the franchisor.
The right to use a brand name actively advertised, promoted and protected by the franchisor.
A clearly defined territory, ideally exclusive to you.
The right to extend the term of the franchise agreement, provided you have met the conditions set out in the initial contract..
The right to sell the business to someone else, provided the franchisor agrees.
Continual improvements to the business practices, products, services and brand by the franchisor.
Check that the franchise is accredited or has applied for accreditation by the British Franchise Association (BFA).
The BFA is the self-regulatory body of the industry, which expects all members to abide by a code of ethical practice..
Bear in mind membership is not mandatory, so check the membership status of any franchise you are considering. See www.thebfa.org.
Check if the contract the franchisor offers was drawn up by a BFA- affiliated solicitor. ‘A BFAaffiliated solicitor will understand franchising, and should ensure the contract is drawn up in the interests of the franchisee as well as the franchisor,’ says Hilary Ferda, of Ladies First, a franchise that involves running a free glossy lifestyle magazine for women.
No magazine experience is necessary, but you must be literate, numerate, and confident enough to visit hotels, spas, shops and fashion shows. Sales or marketing skills help. Investment is Pounds 25,000, payable in three stages. Take your contract to a BFA- affiliated solicitor who’ll know the loopholes to look for.
Many offer to check contracts and prepare a report on the implications for a set fee, usually around Pounds 350-Pounds 700. Many franchisors will encourage you to do this.
Brian Greig, of estate agency franchise RE/MAX, says: ‘Our contract is in a standard format used around the world, but adapted to UK legislation and BFA guidelines.