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How do I Open a UK Franchise?

Article Details
  • Written By: Christopher John
  • Edited By: A. Joseph
  • Last Modified Date: 05 December 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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Opening a franchise in the United Kingdom involves three key phases.  First, you should research the numerous UK franchise opportunities, research the market and interview franchisees.  Second, obtain expert advice from lawyers that specialize in UK franchise law.  Third, devise a business plan to help you secure proper financing. 

First, as a prospective franchisee, you should research what types of franchise opportunities are available.  Fast food, auto repair, printing services and ice cream shops are just a few examples of franchise opportunities.  Investigate which type of franchise works best for you.  What you enjoy doing is just as important as the potential earnings from a UK franchise.  If you enjoy your work, you are more likely to be successful rather than focusing on how much money a particular franchise can generate.

After you find the particular type of business that suits you, research the market in your area.  A preliminary investment in market research will help you determine the viability of a particular UK franchise.  Companies that specialize in conducting market research can help you discover potential problems.  You also can read industry newsletters or other materials that will help you understand the market for the franchise you selected.

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You also should interview other franchisees.  You likely will benefit by gaining insight from the experience of individuals who already have opened a UK franchise.  Be prepared to ask franchisees what it is like to do business with a specific franchisor.  Your interviews might uncover hidden pitfalls that you will want to avoid.  A reputable franchisor should have no problems providing you with the names of franchisees. 

After you perform your preliminary research, your next step should be to obtain legal advice from a lawyer who specializes in UK franchise law.  The UK does not have franchise disclosure laws.  This is not advantageous to a prospective franchisee.  This makes it even more necessary that you seek the advice of a franchise lawyer. He or she will have experience dealing with franchisors and can help protect your interests. 

The franchise agreement is the key document that you will have to sign before you can move forward with your UK franchise.  The franchise agreement will obligate you to the franchisor for a specific term.  Examples of key provisions in the franchise agreement will include fees to the franchisor, restrictions on where you must purchase supplies, termination penalties, ongoing support from the franchisor and exclusivity of territories.

It is imperative that you have your lawyer provide you with advice on the terms of the contracts before you execute any agreement.  An expert can advise you on what terms you can negotiate with a franchisor.  A lawyer also will help you understand your obligations.  For example, your obligations to pay fees are crucial because of how a franchisor will want to calculate the fees.  A UK franchise will not necessarily base fees on the profits of the business.  

The third phase of opening a franchise is developing a comprehensive business plan.  You likely will require financing to open your UK franchise.  The business plan will help you secure financing.  

Banks will want to examine your business plan before providing you with financing.  Your plan should include what percentage of your personal assets you intend to invest into the endeavor.  A bank also will want to know what you will offer as security for the financing.  In addition, the bank will want to see in your plan how you intend to repay the loan.  

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