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There are many potential benefits of buying a franchise, such as having access to well-established business and accounting systems, centralised marketing and a proven business model. Being part of a well-known national brand also has an appeal for many businesspeople.
In exchange for the franchise, the franchisee must pay agreed charges, normally including a royalty on sales.
The Intellectual Property Office has identified the principal advantages of being a franchisee as follows:
However, there are also potential disadvantages to being a franchisee. Often, the cost of running a successful franchise can be appreciably greater than the cost of going it alone, due to the impact of sales commissions and central charges.
It is also common for the franchise agreement to limit the range of activities that the franchisee can carry out, which may prevent a profitable opportunity from being exploited.
The agreements need to be read carefully and thought through, especially the ‘get out’ terms and the clauses which specify the degree of geographical or other exclusivity to which the franchisee is entitled.