Franchise clinic summer 2007

What insurance cover is a UK franchise legally required to have in place? - answered by Maurice Logie

There are two major classes of Insurance that every UK business must have. The first one is Motor Insurance. As most people are aware Third Party motor insurance is compulsory and this applies to any vehicle whether owned by an individual or a business. It is vital to make sure that the insurance policy and registration document tie together in terms of the owner of the vehicle also being the policyholder.

As far as Business Cover is concerned any franchisee or franchisor must have Employer’s Liability cover. This will protect the Employer in terms of their legal liability for injury to any employee that occurs whilst they are working

Most insurers have put together a “Package” policy that will include the basic cover requirements and also build around them other key aspects of insurance, such as Property. Public Liability etc. the role of the Insurance Broker is to help you choose what suits your business best.



How do I make the leap from a small to a medium sized franchise network? answer by Ken Rostron

How the franchisor develops and expands the network will depend on a number of critical factors such as start up costs for new franchisees and the type of premises required to operate the franchise, but the first steps are:

•    Thorough planning and allocation of resources (people & funds) for the duration of the recruitment campaign
•    Ensure that the existing franchise network is stable and achieving most of the franchisee’s (and franchisor’s) expectations
•    Make sure the recruitment process is robust and properly documented so that you retain control of the process throughout

Regrettably I’ve seen potentially successful franchises fail badly about a year after a very successful recruitment campaign, because the support structure was not developed at the same rate as the number of franchisees recruited. A deficient support structure can trigger a number of problems such as the franchisees being dissatisfied with the initial support and refusing to pay fees, or they feel they are not receiving enough guidance and so they pursue their own direction and the franchisor looses control of the network.  

Expanding the franchise network is important and should benefit both the franchisor and franchisee, but it must be done in way that is sustainable and does not jeopardise the existing network in any way. One of our clients in the service industry successfully expanded at the rate of 2 new franchisees per month for 3 years which established them as the leader in their marketplace and they have gone from strength to strength.



One of my franchisees has breached their franchise agreement and I have been unable to successfully resolve the situation - what should I do next? Answer by James O'Flinn

Briefly, you need to consider (1) the seriousness of the breach, (2) what end position do you wish to attain as a result of the breach, and (3) how do you get to that position?

(1) Much will depend on the nature of the breach. That is to say;-

A - Is it so fundamental as to be able to be construed as a repudiation of the franchise agreement by the franchisee, or B - Does the breach fall under one of the grounds for termination of the franchise as set out under the agreement, or C - Is the breach merely minor and capable of remedy?

(2) You also need to consider what your aim is? Do you wish to see if the situation can be resolved and the franchisee continue in line with the resolution achieved or do you wish to terminate the agreement?

(3)The quickest and cheapest route to resolution is usually direct negotiation but any proposals you have may need to be under the heading of 'without prejudice' in order to protect your position. If negotiation fails then mediation is a further option. There are a number of specialist mediation organisations and the bfa also operate a mediation scheme. As a last resort there is litigation, but it is usually expensive, time consuming and rarely completely satisfactory to either party.



Where can I access finance for my business? answer by Steve Websdale, Director, Venture Finance PLC


According to our research, 42 per cent of SMEs only conduct their business finance with banks out of habit, with a third relying on this option purely because they lack knowledge about other funding options.

These findings suggest that entrepreneurs may be failing to access the most suitable funding, an issue compounded by the fact that personal assets are often at risk with many bank related finance options.

A number of avenues are open to businesses seeking additional investment. These include traditional routes such as venture capital and business angels, or more flexible options like invoice and asset-based finance, which are experiencing an explosive growth in popularity. The DTI’s Small Firms Loan Guarantee (SFLG) scheme has also been providing a financial lifeline to SMEs with viable business propositions - but insufficient collateral to secure a traditional loan - for over 25 years.

The main point to stress is that there is no ‘one size fits all’ solution. Instead it is important to choose the right financial package for to suit of the needs of the individual business.

Having chosen the most appropriate form of funding, it is vital to choose the right provider. Not all financiers are the same, so it’s worth shopping around to check what’s on offer.