Protect the brand, boost your value: Ten things to know about franchising and IP
1 Franchising is a quick way to grow…
As many operators have found lately, franchising can rapidly extend a brand’s reach and visibility. “It's a fast and inexpensive route to brand growth,” said Bird & Bird associate James Fowler. “Essentially you're expanding by spending someone else's money, and there’s less operating risk: it's not your business and you're not legally liable for it.”
2 … But it can be hazardous
Franchising isn’t totally problem-free though. “The flip side of having less operational risk is increased brand and reputational risk. You're putting your brand and your business in someone else's hands,” Fowler said. This makes it crucial to do full due diligence on potential partners, and to be sure they properly understand your brand.
3 Investors like it
Until quite recently, many investors were sceptical about the value of franchising—but that’s changed. “Private equity and other investors get it now,” Fowler said. “They see the appeal of asset-light businesses that offer recurring and certain returns and have a capacity for growth.” They are increasingly interested in MUMBOs—Multi-Unit, Multi-Brand Operators—as well. “Some franchisees are big businesses in their own right… if they've signed up to development deals where they've got exclusivity for years and have committed to opening certain number of stores, there’s a pipeline for growth—and that makes it attractive to investors.”
4 You can franchise multiple channels
“The days when food and beverage was a purely high street, bricks-and-mortar sector are long gone,” said Fowler. Deliveries, dark kitchens, retail concessions, ecommerce products, drive-throughs, even the metaverse—they all offer scope for franchising. “It's common now for brands to have multiple franchise owners, each operating a different channel of their business. So when you're selecting partners, it's more important than ever to really test whether they have operating experience in the channels you’re discussing.”
5 Overseas deals may have legal issues
Franchising in the UK is relatively straightforward in legal terms, but that’s not the case in many territories—especially the US, Middle East and Asia. “When you franchise internationally, you need to think about legal and regulatory compliance… it’s something you need to take advice on,” Fowler said.
6 IP is the bedrock of a business
Branding and other aspects of Intellectual Property are as much a part of a business’ infrastructure as venues, service, food and drink, said Bird & Bird’s senior associate Emma Green. “Protecting your brand is so incredibly fundamental. It's an asset that gives you the foundation and the framework to take advantage of opportunities. It's how the consumer perceives you, how you generate your loyalty and how you do your deals with strategic partners.”
7 Get a proper strategy in place
IP is too important to be left to chance, Green said. “Even if you are well established, make sure that your IP strategy stands up to scrutiny… think about the assets you need to protect, and work out with your advisor how you're going to go about protecting them.”
8 Protect your trademarks and copyright
All businesses need to register their trademarks for protection—not just for their main brands and logos, but for spin-off ones in areas like delivery, retail and the metaverse, and not just in the UK but in all relevant territories, where rules vary. Copyright protection is vital too: it’s automatically generated in UK law, but isn’t always straightforward when it comes to partners like creative teams and social media influencers. “What lots of people forget is that it’s the person who makes it that then owns the copyright… so it's important to make sure that in contracts the assignments of rights actually come back into the business,” Green said.
9 Don’t forget your trade secrets
Trade secrets like food recipes and pricing strategies require protection too. “The handling of those needs to be done well, because once they’re out in the open you've got a really big problem,” Green said. “It’s making sure that those in your circle know exactly who should do what with which bits of data.”
10 IP adds value on exit
Boxpark founder Roger Wade stressed the huge value that good IP can add to a business, and the need to protect it. “Get good trademark attorneys and don't try and do it yourself, because the wording is really, really important,” he said. “What's the point of setting up a business if you can't eventually sell it? And the IP is what they will actually be buying in many cases.”
Click here for more insights from the Peach 20/20 Summer Meet Up.