When you are buying a franchise and looking to begin your journey in franchising we have developed a package which can we can tailor to suit your needs.
We recognise that each franchise owner is different and the level of support which each franchise owner needs at this important stage of their business life varies depending on each franchise owner’s experience, business skills and budget. Depending on your circumstances, there are a number of key areas on which you may need assistance:
Whenever you are looking to acquire a business it is important that you carry out some level of due diligence to ensure that the assumptions that you have made, as to what you are buying, are correct. The level of due diligence that you undertake will vary depending on whether you are buying the assets of the business or you are buying shares in a company which operates the business.
In the case of the latter, you will be acquiring all assets and liabilities of the business and therefore a higher level of investigation will normally be required. The due diligence process essentially takes two forms. The first is a physical inspection of the business and any significant assets you are considering acquiring (e.g. stock) and the second is a paper exercise – requesting information and documentation about the business. For example – if you are buying a business that depends on regular work you need to ensure that there are robust contracts in place. Should you require any advice or assistance in putting together a questionnaire and/or reviewing any responses to it please let us know and we can provide you with an indication of fees for any work you would like us to help with.
The purchase agreement may be in the form of either a share purchase agreement or an asset purchase agreement (sometimes referred to as a business transfer agreement). The agreement itself will set out exactly what each party is buying or selling and will also detail the mechanism of completion. One of the most substantial elements of the purchase agreement is the schedule of warranties to be given by the seller to the buyer. Warranties are essentially promises about the business and should it transpire that any of the warranties are untrue then the buyer may have the ability to claw back from the seller part or all of the purchase price.
Warranties tend to be more comprehensive in a share purchase agreement because the company’s liabilities are also taken on. A share purchase agreement will also contain terms detailing which party is responsible for past and future tax liabilities of the company, often referred to as a tax deed.
The disclosure letter is the document which gives the seller the chance to disclose certain information to the buyer to qualify the warranties detailed in the purchase agreement. By way of illustration, the purchase agreement may contain a warranty to the effect that the business is not involved in any litigation. To the extent that the business is involved in litigation then the seller can disclose details of it to the buyer and the buyer cannot subsequently claim that the warranty is untrue.
Should you require any advice or assistance in reviewing the disclosure letter please let us know and we can provide you with an indication of fees for any work you would like us to help with.
Where a business is being acquired it is highly likely that the employees of that business will automatically transfer to the new business as a result of the Transfer of Undertakings
(Protection of Employment) Regulations 2006 (TUPE). There are certain procedural hoops that need to be completed by both parties in order to comply with TUPE.
The requirements of TUPE vary according to the circumstances of each business and in many cases are fairly simple. However, it is important to get the procedure right as the financial implications for failure to do so can be significant. It is our experience that many clients feel comfortable that they can satisfy these requirements without additional advice, but should you require any advice or assistance on the effect of TUPE and ensuring compliance with it please let us know and we can provide you with an indication of fees for any work you would like us to help with.
To assist with this we have prepared and will provide you with a guide to TUPE and its effect.
Please be mindful that under limited circumstances TUPE may apply where you are buying or selling shares in a company, for example, where part of the business is being transferred out of the company immediately prior to the sale of shares in the company. By way of indication a buyer will be required to confirm the basis on which it proposes to take on employees.
If you are considering taking on a franchise it is extremely important that you understand the terms of the franchise agreement. This document sets out the commercial terms of your relationship with the franchisor. Once signed, the franchise agreement is normally placed in a drawer and rarely referred to. However, by being familiar with its terms, you can ensure that you start your journey as a franchisee with your eyes wide open.
The franchise agreement is by its very nature a one-sided document. It allows the franchisor to exercise control over the network as a whole and to maintain its brand reputation -ultimately for your benefit.
On the basis that the franchise agreement is offered to franchisees, in almost all cases, on a “take it or leave it” basis, clients benefit from the franchise agreement reporting service we offer. As part of the reporting service, we will review the franchise agreement and prepare a report on its principle terms, highlighting any unusual or onerous provisions, as well as preparing key questions which you may wish to raise with the franchisor.
In many businesses, one of the key assets is the property from where the business is operated. There are a number of different structures which franchisors use from the franchisees owning the freehold of the property (although this is relatively uncommon) to, more likely, the franchisee having a leasehold interest in the property.
On a franchise resale, the likelihood is that it will involve either the buyer entering into a new lease or arranging for an existing lease to be transferred. A transfer will not only involve the formal transfer between the buyer and seller of the franchise but also obtaining the landlord’s consent. In other situation, the landlord may well require additional security from you such as a rent deposit or personal guarantees.
It is essential that when you are taking on a lease, you ensure that you will be permitted to run the business from the property and it is ‘fit for purpose’ and also that you are clear on your obligations and potential liabilities under the lease not only during the term of the lease but also on expiry of the term of the lease.