Franchising advice needed

[ds65]

Me and partner number 2 are opening a takeaway restaurant. It’s a new concept and we have investors ready to help us either franchise or open multiple locations if we can make this 1 a success.

We have a 3rd partner who is coming on board to help with the first restaurant.

How can we prevent partner 3 from owning the franchises we hope to open?

How can we prevent partner 3 from opening a franchise himself using our branding?

This is all with his permission. I just want to make sure me and partner 2 are protected.

Thanks!

 

[Scalloway]

The only way to do it is to find a good solicitor and get them to draw up a shareholders agreement.

 

[Paul Kelly ICHYB]

# 1

The only way to do it is to find a good solicitor and get them to draw up a shareholders agreement.

#2 Protect the brand's intellectual property

#3 if you have worries about partner 3 at this stage, don't get them involved!

 

[The Resolver]

The first step to take is to decide whether or not you propose to run a franchise or simply run a chain. As you recognise Its too early in fact to launch a franchise since you need to prove the business model first by succesfully running at least two restaurants, - i.e the first one then another to pilot the franchise model. Also discuss with the investors especially those with experience of the industry.

You ask:-

"How can we prevent partner 3 from owning the franchises we hope to open?" - Quite simply you don't grant him a franchise.

"How can we prevent partner 3 from opening a franchise himself using our branding?" - You do not grant him a licence to use your branding but also you register the trade mark - acquire the domains and ensure you do what Scalloway says and enter into a tailored Shareholders Agreement (containing bar out clauses against post exit competitive conduct .

Moving from a two person to a 3 person company is a big step jp. It may be the 3rd person would best take the position of the first pilot franchisee.

Whether you move to a 3 person company or remain a 2 person oompany, it is still vital to enter into a detailed Shareholders Agreement to avoid so many of the damage from inter-shareholder disputes that litter the Legal thread on UKBF , Also read here.

You are welcome to book in for a free 30 mn advice call (see my sig below for the linnk) . I am a lawyer who has advised and drawn up franchises as well as acting for franchisees in dispute with their franchisors.