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What is a Franchise?

A Franchise is a system of marketing goods and/or digital content and/or services under which a party known as a Franchisor grants a licence to a legally and financially separate party known as a Franchisee, writes Sarah Burrows of Edwards & Co Solicitors.

The licence permits the Franchisee to use the Franchisor’s branding and operational model to set up a similar independent business.

The Franchisor permits the Franchisee to use a name which is associated with the Franchisor and its business but the Franchisor exercises continuing quality control over the Franchisee. The Franchisor does however provide assistance on an ongoing basis to the Franchisee on the basis that the Franchisee periodically makes payments to the Franchisor for permission to use the name and other intellectual property owned, managed or controlled by the Franchisor.

Car and brewing industries were the first industries which began to use agreements resembling modern Franchise Agreements. In the brewing industry, developing tied house agreements between brewers and pub landlords and in the car industry, developing dealerships between vehicle manufacturers and dealers.

These original supply dealership arrangements lacked two essential elements of a modern business format franchise where the Franchisee operates its business under the Franchisor’s trade name or trade mark so that to the outside world the Franchisee is the Franchisor and the Franchisor continues to exert substantial influence and control on the way the Franchisee operates its business.

If you are considering entering into a Franchise arrangement whether it is as Franchisor or Franchisee, it is imperative to seek independent legal advice.

For more information or if you have a query about a Franchise please contact Sarah Burrows.