IP and Retail Conference: session 2
Following coffee, Chris Wormald (Field Fisher Waterhouse) bravely stood in for the billed speaker Mark Abell and spoke at some length about the historical background, the economics and the scale of franchising in the United Kingdom and the United States. Encouragingly, nine out of ten business franchise formats are profitable and their rate of increase greatly exceeds that of regular retail outlets. This makes them safer bets for investors.
In terms of legal structure, analogies with other areas of practice have proved insufficient. The doctrine of "community of interest" has underpinned state law in Wisconsin and New Jersey, and affirmed in litigation in the Ziebart case. This contrasts with the "market plan" approach which was adopted by the State of California. Both approaches in the US have definitions of franchising, but neither necessarily appreciates the independence of the parties to a franchise agreements. A better approach is to adopt a "recipe" or "format" for licensed outlets, limited in time, in exchange for fees that provide an incentive to support and develop the franchised brand.
Chris then alluded to the importance of licensing not merely a brand but the know-how and technical knowledge that are incorporated within the franchise concept, and to the importance of piloting a franchise. Finally he ran through the list of key legal ingredients that one should include in a business franchise -- which rights are actually granted, how long they're granted for, the geographical extent, renewal terms, the financial bits, operational terms and the franchisee's right to sell his business. Some countries have laws that require the disclosure of key information; where they don't, a due diligence exercise is needed in order to ascertain what exactly is being franchised, and how.
Chris then alluded to the importance of licensing not merely a brand but the know-how and technical knowledge that are incorporated within the franchise concept, and to the importance of piloting a franchise. Finally he ran through the list of key legal ingredients that one should include in a business franchise -- which rights are actually granted, how long they're granted for, the geographical extent, renewal terms, the financial bits, operational terms and the franchisee's right to sell his business. Some countries have laws that require the disclosure of key information; where they don't, a due diligence exercise is needed in order to ascertain what exactly is being franchised, and how.
