As far as branding goes, fast food and coffee shops are hard to beat. I would suggest that most people instantaneously recognise McDonald’s, Subway, Burger King, Starbucks, Costa etc. And just think how much these concepts have progressed in recent times. McDonald’s interiors and menus are almost unrecognisable from five years ago, and the new look Starbucks outlets adopt a minimalist Scandinavian style - a far cry from its Seattle origins.
A huge proportion of these outlets are franchised - in other words they are operated by independent franchisees under licence. Expanding food and drink concepts through a franchised model has proved to be very successful across the globe. With this in mind, it is remarkable that franchise networks are able to constantly adapt to regulatory change and, more importantly, consumer desires. So how does a franchisor manage to implement network wide changes?
There need to be provisions within the Franchise Agreement to enable flexibility so that the franchisor can roll out changes to the business system with minimal delay. These changes cannot wait until the end of the term of the franchise agreement - often 10 plus years in the fast food and coffee shop sectors. In addition, the franchisor is typically able to update the Franchise Operations Manual (with which the franchisee must comply) to incorporate any development.
However, the real key to transforming a franchised network is getting buy-in from the franchisees. In other words, if the franchisor is able to persuade its franchisees that proposed changes will be of mutual benefit then there is unlikely to be much resistance, even if the franchisee has to put its hand in its pockets. This is where franchising is remarkable - the franchisee will recoup the benefits directly in increased profits and increased value in its outlet(s).
Moreover, an essential element to franchising is its brand. It is far easier to manage a brand if you have direct control over your operations through your employees working in corporate owned outlets. In franchising you are licensing third parties – your franchisees – to use the brand. It is, therefore, essential that the franchisors have sufficient control over, and properly direct, the franchisees’ exploitation of the brand.
This is precisely why Birketts’ Franchising Team is so well placed to provide excellent commercial advice in the franchised food and drink sector. We understand franchising to its very core and ensure that the legal documentation works hand in hand with the network’s commercial needs.
For more information about franchising please contact any member of the Franchising Team.
The content of this article is for general information only. For further information regarding franchising, please contact Ed Savory or a member of Birketts' Food Production and Processing Team. Law covered as at July 2016.