Lesson 5: Key supporting players in the industry.

Contents:

• Introduction
• How do you define an expert? 
• Who are these professional experts potential franchise owners should consult?
• Self assessment question

1) Introduction

When a potential franchise owner decides that franchising could well provide the opportunity to run a business, creating increased income, greater wealth and better long-term security; he or she will soon realise that they will need the support and experience of experts from within the industry. They are ready to help to make the above happen; their professional help will be needed when a prospective franchise owner is:-

• Seriously investigating the market, to help select the best Franchise to match their circumstances and investment level.
• When they are actually involved in the buying process.
• To scrutinise the Agreement and other legal documents and the operating manuals.
• To start setting up in business.

2) How do you define an expert?

• An expert is a person, who has taken time to learn about a specific topic.
• Acquired particular skills and can handle, through experience, difficult and unique situations.
• That person knows, or has access to the knowledge, about a particular subject, knows about the most recent developments and trends and has the ability to pass that knowledge on.
• These skills can be derived from formal and specialist education, plus an element of self-instruction.
• If you add the above, couple that with 'hands-on experience' you have created the ideal expert.

Coming into the Franchising industry for the first time, new franchise owners might well understand the expert's specialism, e.g. law or accountancy but obviously they will not fully appreciate how these particular disciplines operate in the Franchising arena. They will need to seek out professionals with 'hands-on' experience.

3) Who are these professional experts potential franchise owners should consult?  

• The Franchise Lawyer.
• The Franchise Accountant.
• The British Franchise Association.
• The Franchise Consultant.
• Training Providers.

As the Franchise owner's relationship with the Franchise will be built around the Agreement, your lawyer will focus on its key areas.

• Ownership
• Services provided by the Franchisor
• Your future commitments
• The agreement itself
• The fee structure

Ownership

• The Franchisor's proprietary rights.
• Your rights as a new franchise owner.
• Controls stipulated by the Franchisor i.e. regarding non-competition, the strict confidentiality clauses.
• Controls that make sure the approved system of operation can be replicated and the original conception can be maintained.

Services provided by the Franchisor
The lawyer will examine carefully what the Franchise Agreement states the Franchisor is going to provide, at the start and throughout the agreement.

Your future commitments

• Operating correctly the Franchisor's, operating, financial and administrative systems.
• The amount of on-going training the franchise owner would be expected to provide.

The agreement itself
The Franchise lawyer will look at the length of the Agreement and particularly the Franchisor's agreement to a renewal. He will look at the provisions regarding the sale of the business and the disposal on the death of the Franchise owner. He will look at the affects of any breach of the Agreement. Could those failures lead to termination of the Agreement? In the event of minor failures, can the Franchise owner be given time to make corrections, improvements etc. Has the Franchisor created an option to buy the business on resale? What will be the Franchisor's method of evaluating the business's final valuation?

The fee structure
He will examine and report on the initial franchise fee and the terms set out by the Franchisor for the calculation of the on-going royalty fees. Your lawyer will emphasise that it is vital that you as a prospective franchise owner, fully understand and appreciate the obligations you will be undertaking under the Franchise. To appreciate what a well-recognised franchise lawyer provides, we show below what is available from Leathes Prior in Norwich.Leathes Prior is one of the leading specialist franchise law firms in the UK centred in Norwich ; they have office facilities in London and through associated offices in major international commercial centres. Their franchising expertise is recognised through affiliation to the Franchise Association and through the experience of their key franchise lawyers and as a result Leathes Prior is acknowledged as one of the leading franchise firms in the U.K. They provide a highly cost-effective and comprehensive service, both nationally and internationally, to franchisors and franchise owners across the full range of business sectors and prove a good example of what a prospective franchise owner should expect from a quality franchise lawyer.

They provide the following:-

A fixed-fee report.
In order to provide franchise owners with the cost effective advice they require, they have developed a fixed fee report service. This provides a franchise owner with a written report on the Franchise Agreement and related documentation, explaining precisely what the Agreement means in commercial terms, highlighting any problem areas and indicating points which it fails to cover. A franchise owner is then able to make a more informed commercial decision as to whether or not to proceed. Their report will list those points which should be raised with the Franchisor's solicitors and report on the other steps that the Franchise owner should take to investigate the Franchise before concluding the Agreement. Their cost for preparing such a report will normally be between £490 and £690 plus vat and disbursements, depending upon the particular Agreement. They will agree with you the precise amount of the fixed fee before they commence the preparation of the report. They can normally complete the report within five working days of receiving your instructions.

Franchise information exchange.
Leathes Prior solicitors are members of the Franchise information exchange comprising a group of British Franchise Association affiliated law firms across the UK, providing each other with information on franchise opportunities and the early warning of problems arising in particular franchises. Their fixed-fee report includes conducting a franchise information exchange search on your selected franchise.

Premises
Where the Franchise involves the lease of premises, they will advise on that aspect of the transaction, since it is important that provisions of any lease accord with that of the Franchise Agreement. It would be both prudent and cost effective for the Franchise owner to have the same solicitors to deal with both the report on the Agreement and on the Lease.Once the commercial terms of the Lease are identified, they can agree with the Franchise owner, a budget for undertaking this work.

Partnership, limited company or sole trader
They are able to advise you on the structure of your business, whether you propose to trade as an individual or in partnership with another or through a limited company.

Data protection, privacy and health and safety
Leathes Prior can provide practical advice in order to assist franchise owners implement the Franchisor's respective data protection and health and safety policies as set out in the Franchisor's operations manual.

Licensing and intellectual property advice
Business format franchising has now become well established as a popular and successful structure for business expansion. A business format franchise is essentially a particular type of licence incorporating specific features; there are however any number of other licensing arrangements incorporating one or more of those features which are sometimes loosely described as franchises from motor dealership agreements to simple trade mark licences. In the absence of any specific legislation on franchising in the U.K., advice on it requires detailed knowledge of a number of areas of law; Leathes Prior are experienced and will advise in confidence.

• Formation services.
• Book-keeping.
• Vat returns.
• Management accounts.
• Annual accounts,
• Corporation tax.
• Self-assessment tax.
• Payroll.
• Registered office services.
• Company secretarial services,
• Tax-planning.
• Pension planning.
• Audit.

To appreciate what a good franchise accountant provides we give a good example below.

FranAccounts Horsham, West Sussex, a British Franchise Association approved listed accountant, emphasise that if you are looking to invest in a franchise it is important that you have the right team behind you. Your choice of accountant will affect your franchise business from day one. Your chances of being successful can depend on the advice, knowledge and the level of service you receive from your accountant.

Before signing your Franchise Agreement, you should appoint an accountant who has experience within the Franchise industry; they will be able to offer you advice on your business formation, any issues with customs and excise and the inland revenue and in particular, the Franchise contractual requirements for your accounting records. To help your choice Fran Accounts provide a checklist of questions, that prospective franchise owners should ask accountants before they make their final selection. Fran Accounts, a highly professional franchise accounting firm, emphasise, by using their checklist when checking accountants, you should be able to get the right advice, at the right time and at a competitive cost.

Does the financial accountant provide a free initial consultation?

• If you can clarify the main issues of your business formation, tax, vat, accounting software and a record keeping at the initial consultation for no cost, it will greatly reduce your initial set-up costs.

Are they affiliated members of the British Franchise Association?

• If your accountant is an affiliate member of the B.F.A., then you have the assurance that he understands the concept of Franchising, the contractual relationship between franchisor and franchise owner and the accounting requirements and obligations imposed on the Franchise owner.

Are they members of a recognised Accounting Institute or Association (Chartered or Certified)?

• If your accountant is a member of a recognised accounting institute or association, you should rightly expect that he will work to his industry's professional standards, adding to your peace of mind.

Do they provide business formation advice?

• How you set up and form your business, (a sole trader, partnership or limited company), could have serious implications regarding funding for the business, past and future tax liabilities and on the business's future construction.

Do they have a dedicated franchise team that has experience in the Franchise industry?

• How many franchise companies, (franchisors) do they deal with? Do they have experience of franchising within franchise businesses and can their accounting team comply with the accounting requirements as laid down in your Agreement.

Can they provide a free helpline for all their services?

• Back-up and support cover, over your entire accounting and financial requirements can be so important and helpful, allowing you time to concentrate on growing your business.
• Although invaluable, such back-up and support can become expensive.

Do they provide additional services such as payroll, or book keeping, vat accounting and stock control?

• Check the various services offered, as some accountants will prepare annual accounts and provide taxation advice.
• They might not necessarily provide additional services, such as monthly management accounts, book keeping, vat accounting and stock control.

Can the accounting firm provide remote on-line accounting services?

• With online accounting services, you can have complete flexibility.
• You decide the amount of processing you carry out and the amount your accountant carries out.
• Transfer of data, back-ups and restoring data are no longer required and you have off-site daily back-ups.

Are their fees good value and fixed where possible?

• Try and obtain fixed quoted fees wherever possible to avoid any unpleasant surprises at the end of the year.

Can they provide the accounting services required by your Franchise Agreement, i. e. monthly management accounts?

• Many Franchise Agreements now require franchises to submit monthly management accounts in an agreed franchisor format.

When the franchise is up and running, as a new franchise owner, you may well decide to retain the services of the franchise accountant who served you well during your purchase; or you may use the local family accountant. What you will need however is a competent book-keeper. If the amount of work justifies it, you may decide to add the book-keeper to your staff numbers or buy the professional services as needed.

For qualified book-keepers in your area.

Contact: -

The Institute of Certified Book-keepers.(info@bookkeepers.org.uk)

The British Franchise Association
T he B.F.A. provides an invaluable service for prospective franchise owners through their vetting of Franchise networks and their service and development of the Franchise industry.

What can the British Franchise Association do for you?
The B.F.A. evolved from the Franchise industry itself in 1977, as the only voluntary accreditation body for franchising, their remit was and is to develop and continuously improve the standards of good practice in franchising and to accredit franchisors who meet these standards. Many organisations say that they are 'franchisers' but not all are and not all are accredited by the B.F.A. The B.F.A. accredits franchise companies for membership on the basis of a strict standards structure. These standards comprise:-

• The company's financial position.
• Its day-to-day business activity.
• The disclosures made to prospective franchise owners and the terms of a Franchise Agreement.
• The standards are based on the European code of ethics for franchising, agreed by the member associations of the European Franchise Federation in 1990 and recognised by the European Commission. Companies are re-accredited for B.F.A. membership on triennial basis.

However, it is important to note that the B.F.A.'s detailed checks concern the company's fitness to franchise rather than the suitability and prospects of a particular product or service in a particular market. Alongside the B.F.A's reputation for high franchising standards, which in turn works to enhance the image of its members and their businesses, the B.F.A. offers many services and benefits to support members and provide all levels of continuing help to prospective Franchise owners.

The British Franchise Association membership criteria:-
By joining the British Franchise Association, Members, both full and associate, commit themselves to comply with the terms of the following policies and procedures as published by the association:-

• The code of ethical conduct.
• The disciplinary procedure.
• The complaints procedure.
• The appeals procedure.
• The terms of annual re-accreditation.

Members also agree to comply with the code of advertising practice as published by the advertising standards authority.

In addition members also agree to provide to the Association, any non- confidential information relating to their Franchise business, or relating to the standing and qualifications of its directors, as may be requested by an authorised official of the Association.  Members also agree to provide a full-time official of the Association, so authorised by council, access (at reasonable times and on reasonable notice), to confidential information relating to the Franchise and its standing (on the understanding that such information remains confidential to the authorised official). The Association offers a conciliation service and an arbitration scheme under the auspices of the Institute of Arbitrators which is available to franchisors and franchise owners who jointly agree to use the service. Members of the Association also seek to comply with the spirit and intent of the guidelines to best practice as published by the Association from time to time.

In respect of both, the foregoing general conditions of membership, and the following specific terms, whilst the Association will use their best endeavours to establish the eligibility of an applicant, the onus for demonstrating that the criteria has been met on initial accreditation or re-accreditation lies finally the with the applicant. Full members have to satisfy the Association of their proven trading and franchising record. Associate and full members also have to satisfy the Association that their businesses are viable, franchisable, and ethical and all relevant facts have been disclosed. When the Association looks at prospective franchisors who have applied to become members, franchisors must demonstrate that:-

• The businesses themselves are viable.
• They must demonstrate that the operating units in the businesses can be successfully replicated.
• They must demonstrate that the contractual terms to be offered to prospective franchise owners comply with the association's code of ethical conduct and such other terms as it may publish from time- to- time.
• They must demonstrate that the offer documents to be used with prospective Franchise owners present a full and realistic picture of the Franchise proposition.
• Finally they must demonstrate that the Franchise network has developed over time with a proven trading and franchising record.

From a prospective Franchise owner's viewpoint, why buy a franchise from a franchisor who is a current B.F.A. member?

• Because the B.F.A. have identified companies offering an ethical Business Format Franchise.
• They have identified franchisors, willing and able to meet published standards of good practice.
• They have obtained an on-going commitment on the part of their selected franchisors to act ethically and keep up with best practice.
• As a new franchise owner you have access to their low cost complaints and arbitration schemes should a dispute arise.
• B.F.A. endorsement of your franchise network makes the sale of your business easier.
• Protection from unwarranted legislation in the U.K. and in Europe.
• Representation through the B.F.A.'s national franchise owner forum.
• Exclusive access to the prestigious B.F.A. Franchise owner of the Year Award Scheme sponsored by H.S.B.C. and the Daily Express.

Who can help you through the stages from, your initial interest in franchising to selecting a franchise and starting up?

When you are looking to buy a franchise, you will be faced with a massive array of offerings and claims, the selection could well take several months even several years, but there is help on hand from well-established and respected franchise consultants. What do franchise consultants offer?

Franchise Development Services Limited has had over 25 years of experience in the Franchise industry and offers help to would be franchise owners during every step of the process, from the Franchise owner's initial interest to the successful running of the outlet. Their support begins when they review your aspirations, your plans; keeping your confidences from the start, working at all times to find the best real opportunity that matches your particular needs. After completing a profile of themselves on line F.D.S.Ltd.'s website offer all prospective franchise owner visitors a free registration which allows them to identify brands and industry sectors of interest and to be able to request more information from relevant advertisers.

This creates a strong flow of qualified leads for franchisors, seeking to refine the interest generated by their website strategy, for their benefit and to the Franchise owner's advantage; they then only speak to serious potential Franchise owners.

F.D.S Ltd. use many Franchise owner recruitment tools and in particular Fran Match which is their professional lead management service which assists the Franchisor right through the Franchise owner recruitment process, from lead generation through to the signing of the Franchise Agreement.

This one-stop-shop for franchise owner recruitment offered by F.D.S. Ltd. enables them to generate, manage and qualify the lead to ensure that when the parties meet, their Franchise owner candidate matches the Franchisor's profile and is seriously interested in investing in his Franchise. This is very beneficial to the Franchise owner, in time saved and opportunities identified.

F.D.S.Ltd. produce The Franchise Magazine which is the U.K.'s best selling franchise magazine, first published in 1985 and is now distributed in print via WH Smith and other leading newsagents, and online at www.thefranchisemagazine.net every six weeks (eight times a year), each edition coincides with a major Franchise Exhibition in the U.K.

The Franchise Magazine is designed specifically to help educate motivate and recruit franchise owners, alongside their well-researched supporting editorial, legislation updates, advisory features and valuable information on a variety of topics related to the Franchise industry.

They also produce The U.K. Franchise directory.

Designed to produce quality leads from serious candidates on a regular weekly basis, the U.K. Franchise directory online was established as a printed directory some 21 years ago.

• Initiatives through search engine marketing, online advertising and valuable links attract a great deal of quality prospects.
• Their online search tools and quality content quickly help match potential Franchise buyers with the Franchise opportunities that they are seeking.
• This is very helpful to potential franchise owners.

Unlike other online recruitment tools, which produce a mass of unqualified leads, which take time and resources to filter, the U.K. Franchise Directory on-line is designed.

• To turn visitors into specific leads for specific franchisors.
• They filter out duplicate leads and spam applicants so franchisors only receive leads matching their criteria.

F.D.S.Ltd. website based tools allows;-  

Franchisors to specifically determine the profile of their prospective Franchise owners.

•   Together with the investment levels needed.
•   Information on available territories.
•   Leads are never shared or sold.

Should you as a prospective franchise owner require information on other brands, you must make that specific request for their information.

You control the situation. more information on the extensive range of services offered by F.D.S.Ltd. go to;-

www.fdsfranchise.com

Search from wealth of articles and resources from FDS

Custom Search

Franchise Development Services Limited.
56 Surrey Street, Norwich, NR 3 FD1

01603 620 301

To support you in your plans to own your own business, if you are considering Franchising as a real possibility; your first real decision should be to contact an established well-informed and professional firm of Franchise Consultants who are keen and qualified to help you achieve your aims.

However knowledge, information and guidance is essential during those early months leading up to selecting a franchise, this can be well provided, by using the vital information provided by carefully written on-line courses such as this one :-

Becoming a successful franchise owner.

As a new franchise owner however you may well feel that there are still some training gaps to fill.

Contact :- Franchise Training Ltd.( www.franchisetraining.co.uk )

They will be pleased to discuss your training requirements and provide a successful way forward.

Their web-site will show you the current programmes on offer and their mailing list, will keep you advise d on future developments.