Dentons’ recent franchising masterclass brought together 30 participants from across the food and beverage, retail and service industries to discuss how to get ready to franchise in a new market. 

Key take aways include:

Franchisor preparation

• Register your trademarks as early as you can.
• Conduct careful due diligence on the prospective franchisee. This needs to cover not only financial, but also operational capabilities.
• Visit the territory, visit existing operations and take references from other franchise brands.
• Conduct market research.
• Undertake a red flag legal risk analysis to establish obstacles for market entry.
• Sign a non-disclosure agreement before releasing any confidential information.
• Do not take a deposit until you have made sure that there is no franchise disclosure or registration requirement that you must first comply with.
• Sign a non-binding term sheet to lock in key commercial terms.
• Prepare your franchise agreement using specialist franchise lawyers familiar with the target country.

Franchisee preparation

• Visit the franchisor in its home country and spend time understanding the business model.
• Conduct market research.
• Talk to other franchisees of the franchisor.
• Request facts and figures about the profitability of the business.
• Ask about what support systems the franchisor will provide.
• Ask about the Franchise Manual.  You may not be able to have full access to this until you have signed the franchise agreement, but you should have an opportunity to see the table of contents.
• Carefully negotiate the term sheet.
• Get negotiation support from experienced franchise counsel.

Franchising is a niche specialist area. Unless you have experienced franchise professionals in your company, you should make sure that you get the right legal and professional support. Take proper time to negotiate the contract as it will govern the investment and relationship over the next 10 to 20 years.

A good franchise lawyer should save you more money than you would pay him or her in legal fees. In addition to legal advice, the team at Dentons can also help with benchmarking fee models and understanding market best practice.