Seeking Advice: Starting a Complementary Sole Trader Business as a Franchisee

[FelineFocussed]

Hi all,
I’m looking for some advice from anyone with experience in franchising or business structure.
I’ve been running my franchised business for the past 10 months and remain fully committed to its success - it's something I’ve invested in heavily both emotionally, financially and professionally.
I’m now considering starting a separate, independent sole trader business that would be complementary to, but not in competition with, my franchised work. The idea is small-scale and would not demand a significant amount of my time or attention. In fact, I see it as a potential marketing opportunity that could generate referrals and new clients for my franchised business.
However, I’ve not yet raised this with my franchisor and I anticipate some resistance. I believe they expect 100% focus from franchisees (which I have maintained and will continue to do). My question is:

• Is it generally permissible for a franchisee to run an additional, non-competing business alongside their franchise?
• Can the franchisor prevent me from doing so legally, depending on the franchise agreement?
• What’s the best way to approach this conversation with them?
• How can I clearly and confidently justify that this new business won’t detract from my performance as a franchisee, but may in fact benefit the brand?
• Any tips for addressing concerns or objections I may face?

I want to remain transparent and respectful while also exploring this opportunity, so any insights - especially from fellow franchisees or franchisors, or those in the same position -would be really appreciated.

Thanks in advance!

 

[Newchodge]

Hi all,
I’m looking for some advice from anyone with experience in franchising or business structure.
I’ve been running my franchised business for the past 10 months and remain fully committed to its success - it's something I’ve invested in heavily both emotionally, financially and professionally.
I’m now considering starting a separate, independent sole trader business that would be complementary to, but not in competition with, my franchised work. The idea is small-scale and would not demand a significant amount of my time or attention. In fact, I see it as a potential marketing opportunity that could generate referrals and new clients for my franchised business.
However, I’ve not yet raised this with my franchisor and I anticipate some resistance. I believe they expect 100% focus from franchisees (which I have maintained and will continue to do). My question is:

• Is it generally permissible for a franchisee to run an additional, non-competing business alongside their franchise?
• Can the franchisor prevent me from doing so legally, depending on the franchise agreement?
• What’s the best way to approach this conversation with them?
• How can I clearly and confidently justify that this new business won’t detract from my performance as a franchisee, but may in fact benefit the brand?
• Any tips for addressing concerns or objections I may face?

I want to remain transparent and respectful while also exploring this opportunity, so any insights - especially from fellow franchisees or franchisors, or those in the same position -would be really appreciated.

Thanks in advance!

What doe4s the franchise agreement say?

 

[FelineFocussed]

What doe4s the franchise agreement say?

There is a Non-Compete clause in the franchise agreement, stating:
In term restrictions - During the term of this agreement you, your owners, nor your employees will have any direct or indirect interest in or do anything for the benefit of any Similar Business or Competing Business.

There is also a clause saying:
Breach of any of the in-term restrictions against competition provided in clause ** or any obligation to devote your whole time and attention to the Franchised Business.

There is also a statement in the Franchise Disclosure Acknowledgement document which says:
Employment Status: I confirm that I am not currently engaged in full time or part time employment or enrolled in full time education. I understand that managing a ****** franchise demands significant time and focus, which may be incompatible with other substantial commitments.

Although I am aware that the Franchise Disclosure document is not legally binding.

 

[Newchodge]

There is a Non-Compete clause in the franchise agreement, stating:
In term restrictions - During the term of this agreement you, your owners, nor your employees will have any direct or indirect interest in or do anything for the benefit of any Similar Business or Competing Business.

There is also a clause saying:
Breach of any of the in-term restrictions against competition provided in clause ** or any obligation to devote your whole time and attention to the Franchised Business.

There is also a statement in the Franchise Disclosure Acknowledgement document which says:
Employment Status: I confirm that I am not currently engaged in full time or part time employment or enrolled in full time education. I understand that managing a ****** franchise demands significant time and focus, which may be incompatible with other substantial commitments.

Although I am aware that the Franchise Disclosure document is not legally binding.

Seems pretty clear to me.

 

[FelineFocussed]

Seems pretty clear to me.

Thank you - however, it isn't completely clear to me (hence why I am asking - new to business so forgive my naivety and lack of business acumen) - please elaborate.

 

[Newchodge]

Thank you - however, it isn't completely clear to me (hence why I am asking - new to business so forgive my naivety and lack of business acumen) - please elaborate.

It looks as if you would be in breach of the agreement. You need paid for legal advice to be more aware of the problems. I would go back to the lawyer who advised you about the franchise agreement.

 

[FelineFocussed]

It looks as if you would be in breach of the agreement. You need paid for legal advice to be more aware of the problems. I would go back to the lawyer who advised you about the franchise agreement.

Thanks - would this likely be the case even if my new proposal is not a similar business nor in direct competition with my franchised business, or is it something else in the clauses that makes you suspect this?

 

[Mark T Jones]

Do you have an active, approachable contact with the franchisor?

The devil might be in the detail. My interpretation is that you won't be in breach of the first one of there is no direct conflict - but there may be 'definitions' - eg are you taking a slice of the same budget?

I can't see the second one being enforceable in itself, but may impact targets or objectives set.

 

[VilandreFo]

It depends entirely on your franchise agreement. Many agreements include a non-compete clause, exclusivity, or restrictions on outside business activities that could be seen as a conflict of interest or a distraction.

 

[bodgitt&scarperLTD]

Reason #1097 not to buy a franchaise...

 

[FelineFocussed]

Do you have an active, approachable contact with the franchisor?

The devil might be in the detail. My interpretation is that you won't be in breach of the first one of there is no direct conflict - but there may be 'definitions' - eg are you taking a slice of the same budget?

I can't see the second one being enforceable in itself, but may impact targets or objectives set.

Thanks Mark, the franchisor is a little unpredictable, but generally seems fairly controlling (which is understandable as the franchise grows, to protect the brand), so it is hard to know the reaction.

Like I say, the two businesses are complementary, not competitive (think dog-walking, and then dog microchipping - where the latter is a legal requirement in the UK, encourages responsible pet ownership and feeds as a prospective new client leads, directly to the former, to create new customers for the dog walking business - but they are not competing for a slice of the same budget.

In the example case detailed above, providing a microchipping service seems to be a kind of marketing strategy for the dog walking business!

As far as targets and objectives, obviously they are to maximise the potential of the territory. I feel that offering a complementary service does this as it enables more contact with potential clients who may use my franchised service in the future, and will share my details with their contacts.

 

[FelineFocussed]

Reason #1097 not to buy a franchaise...

Certainly a consideration!

 

[japancool]

or any obligation to devote your whole time and attention to the Franchised Business.

I don't see how they can enforce this. Surely this would be restraint of trade?

 

[Chris Ashdown]

If married do every thing in Wife's name and work behind the scene, dont answer the phone