Buying a franchise is a way of taking advantage of the success of an established business. As the "franchisee", you buy a licence to use the
name, products, services, and management support systems of the "franchiser" company. This licence normally covers a particular geographical
area and runs for a limited time.
The way you pay for the franchise may be through an initial fee, ongoing management fees, a share of your turnover, or a combination of
these.
A franchise business can take different legal forms - most are sole traders, partnerships or limited companies. Whatever the structure, the
franchisee's freedom to manage the business is limited by the terms of the franchise agreement.
Set-up
This depends on the business structure that the franchisee chooses for their business - usually a sole trader, partnership or limited company.
Management and raising finance
Franchise agreements usually set out how the franchised business should be run, although they may allow some flexibility. Franchisers usually
provide management help and training to franchisees.
Normally the franchisee must find the money needed to start up the business, but franchisers may sometimes loan some of this.
Records and accounts
These depend on the business structure that the franchisee chooses for their business. As well as the usual legal requirements, franchisers
often expect franchisees to show them detailed financial records.
Profits
Franchisees often pay a share of their turnover to the franchiser, which brings down the overall profits.
Tax and National Insurance
These depend on the business structure that the franchisee chooses for their business.
Liability
These depend on the business structure that the franchisee chooses for their business.
