Top tips for buying a Franchise

Franchising represents an exciting option for those wishing to start their own business.  The franchising sector has grown substantially over the last few decades and franchises can be found in a range of sectors.  However, the unique nature of the franchise structure as a business model means it is essential you carefully research the prospective franchise and obtain the correct advice before investing a significant amount of money into a franchise.  The following paragraphs are not intended to be an exhaustive list of matters for the purchaser of a franchise to consider but provide a number of “top tips” that you may wish to take into account before proceeding:

 

• Choose a sector which you have an interest.  Purchasing a franchise is a long term commitment, usually five years with an option to extend the agreement for the same period.  Even with the support of the franchise network, the franchise, as with any business, will become a major part of your life and therefore it is crucial that you choose something which you enjoy.

 

• Make sure you conduct your own investigations into the financial viability of the franchise you intend to purchase.  Most Franchisors will run a pilot scheme before launching their franchise and any financial information provided to you is likely to have been obtained from this pilot scheme.  Whilst the information may be correct, you should undertake your own financial investigation to ensure that the figures ‘stack up’.If you have any doubts about the accuracy of the information do not be afraid to challenge the Franchisor as to their accuracy.

 

• Consider the geographical area (referred to as the ‘territory’) which you are purchasing.  Are there sufficient prospective customers? Is the business one which is likely to appeal to customers within your territory?     

 

• If you decide to purchase the franchise, in addition to the cost of actually buying the franchise, you will also need sufficient working capital to enable you to operate the business.  As with any business, the possibility of the franchise generating income from the first day of business is likely to be limited.  Therefore you need to ensure that you have sufficient funds to pay the suppliers, employees, general business expenses and importantly the franchise management fee.  There are various sources of funding available and many banks have specialist departments who are able to provide financial support and assistance.

 

• The Franchise Agreement and Operating Manual are the documents which govern how you operate your franchise business.  However franchise agreements are strangely unique.  In particular they contain many restrictions on how you operate the business, the information which you are required to provide to the Franchisor and monthly payments which must be made to the Franchisor.  Franchise agreements tend to be extremely lengthy and often include “nasty” surprises for the unsuspecting purchaser of the franchise, including a number of clauses which mean that you will be liable to the Franchisor for various losses it may suffer as the result of your actions in relation to the business.  Franchise agreements are generally non-negotiable meaning it is even more important you have a clear understanding of what you are signing.  Because of the unique nature of these agreements and their complexity, it is vital that your legal adviser has experience in advising on franchise agreements and understands the structure of the business model.  Obtaining the incorrect legal advice can be catastrophic for the future success of your business.

 

• Decide on the structure of your business.  Generally speaking you can run your business either as a sole trader, limited liability partnership or limited company.  Whilst the benefits of operating as a limited company are to protect you from personal liability for debts incurred by your company, be aware that the Franchisor will usually require you to sign a personal guarantee in relation to your company’s obligations under the franchise agreement.  Again your legal adviser should be able to advise you on the most appropriate style of trading as part of his initial advice.

 

The above paragraphs provide a very limited overview of those issues which you should consider prior to purchasing a franchise.  The rewards of such a business can be significant and the support of the Franchisor and his network are invaluable.  However, this does not detract from the hard work which as a business owner you will need to invest into making your franchise business a success. 

 

At Rebian Solicitors we provide a comprehensive service for both Franchisors and Franchisees and we are able to provide you with concise and pragmatic advice on both the structuring of your business, the Franchise Agreement and general business related matters.  If you would like to discuss any issue of franchise further, please feel free to contact Ian Townsend on 0113 203 1999.

 

 

Stop the clock: ACAS Early Conciliation for employment disputes

The Spring Equinox is upon us, we’ve put our clocks forward and we have officially moved into British Summer Time.  Whilst we may have lost an hour in bed those wishing to bring a claim in the Employment Tribunal stand to gain time  in a ‘Bernard’s Watch’ style thanks to the implementation of the new ACAS Early Conciliation (“EC“) – be careful what you wish for!

As of 6 April 2014 the Employment Tribunals (Early Conciliation: Exemptions and Rules of Procedure) Regulations 2014 will come into effect which will give disgruntled employees the chance to resolve their disputes with the assistance of ACAS and avoid the need to pay the steep fees that an Employment Tribunal currently demands.

 What is the purpose of EC?

The purpose of EC is to provide a protected space in which the parties can explore settlement with the help of ACAS before a claim is submitted in the Employment Tribunal. If settlement can be reached before a claim is settled there is the obvious benefit of costs savings to the parties and to the public purse. ACAS have produced a flow chart depicting the process which can be accessed here.

 The process

Until 6 May 2014 EC is completely voluntary. After 6 May those who wish to bring a complaint to the Employment Tribunal must first approach ACAS before a claim will be accepted. Contrary to popular belief, conciliation itself remains optional (forced conciliation is in itself an oxymoron) however notification of your intent to bring a claim is mandatory.

Prior to submitting a claim form an employee must make contact with ACAS by completing the online form, by posting the form or by telephoning ACAS and giving the information for them to fill out the form. The form does not give the employee room to provide the chapter and verse of his problem. The form is very simple and asks for the employee’s name and address and the name and address of one of the people that they have a dispute with – which generally will be the employer.

It is important that the employee gives the correct name of the employer; if the ET1 does not marry up it may well be rejected.

Once ACAS have the completed form it will make contact with the employee and ask whether they want to attempt early conciliation to resolve the dispute. If the employee agrees ACAS will then make contact with the employer and ask whether they want to attempt EC. If both parties are in agreement ACAS will attempt EC.

Stop the clock

Unlike the current pre-claim conciliation process, where employees would have to keep an eye on the limitation the EC process stops the clock for the period of conciliation. Under the Regulations EC may last for up to one calendar month starting on the date that ACAS receive a copy of the EC form. If it is ACAS feels that more time is needed it may extend the period by up to 14 days. This will result in an extension of time to submit the claim in the Employment Tribunal. As I understand it there will be no assistance from the ET in calculating the new limitation and it will leave employees and their representatives reaching for their calendars and date calculators (see here for a date calculator). Here’s the tricky bit:

a)    Generally, where an employee completes an EC form the clock will stop the day after the employee contacts ACAS and will start again on the day that they receive the EC certificate. For example:

• Dave, Angela and John are all dismissed from Employer Limited on the same day with effect from 6 May 2014. Their ordinary time limit in which to submit a claim in the Employment Tribunal is therefore 5 August 2014.
  • Dave completes an EC form on 7 May 2014 and is unsuccessful in achieving settlement by 7 June 2014. ACAS issue an EC certificate to Dave on 6 June 2014. Dave therefore adds 30 days to his limitation period.  Dave’s new limitation date is 4 September 2014.

• Angela completes an EC form on 25 June 2014. A period of conciliation then takes place for two weeks which is unsuccessful and Angela receives an EC certificate on 9 July 2014.  For the period of 26 June – 9 July 2014 the clock has stopped. Angela can therefore add 14 days onto her limitation period. Angela’s new limitation date is 19 August 2014.

•  John completes an EC form on 25 June 2014. A period of conciliation then takes place for one month and an extension of time is granted for a further two weeks. Despite this EC is unsuccessful. A EC Certificate is served on John on 9 August 2014. For the period 26 June – 9 August 2014 the clock has stopped for limitation purposes. John can therefore add this time onto his limitation period. John’s new time limit would be 19 September 2014.

b)    Where the normal time limit for bringing a claim would expire in the period beginning with the day when an employee contacts ACAS and ending a month after the day the employee receives the EC certificate, the time limitation period will be extended by exactly one calendar month beginning with the day after the EC certificate is received by the employee. For example:

• Susan’s employment is terminated on 6 May 2014 and she thinks she may have a claim for unfair dismissal. The normal time limit for this claim is 5 August 2014. On 5 August 2014 Susan contacts ACAS to begin EC. Susan undertakes a period of two weeks conciliation which is unsuccessful. ACAS issue an EC certificate to Susan on 20 August 2014. Susan’s new time limit to submit a claim in the Employment Tribunal would be 20 September 2014.

• Andrew is dismissed on 6 May 2014 and believes he has a claim for unfair dismissal. The normal time limit for this claim is 5 August 2014. On 15 July 2014 Andrew contacts ACAS and attempts EC. EC lasts one month and is unsuccessful. Andrew is issued with an EC certificate on 18 August 2014. Andrew would be granted a further month from 19 August 2014 with which to submit a claim in the Employment Tribunal. Andrew’s new time limit is therefore 19 September 2014.

When EC is finished ACAS will issue a certificate that will bring EC to a close. ACAS will produce an EC certificate which will have on it a unique reference number (“URN“). If either party decide that they do not want to conciliate or the period of time comes to an end the ACAS conciliator will bring matters to an end and issue the EC certificate containing the URN.

 An employee can only stop the clock if they approach ACAS before the end of the limitation period. If an employee is out of time and want to rely on a reason to extend the time they will not benefit by attempting EC before putting in a claim.

When don’t you need to go though EC?

Notifying ACAS is mandatory in most cases but not all. For example, where the employer is a security service, secret intelligence service or GCHQ an employee is not expected to notify ACAS. Similarly where an employee is one of a group of employees wanting to bring the same claim arising out of the same facts only one of those employees need to have approached ACAS, the other employees can use the URN of the first employee.

In addition the mandatory notification only applies to ‘relevant proceedings’ and therefore only the majority of employment claims. If an employee is bringing a claim for a mixture of claims which includes ‘relevant proceedings’ and not relevant proceedings he does not have to notify ACAS. Furthermore the mandatory notification rule does not apply where the employee is bringing a claim for unfair dismissal and seeking interim relief.

 Potential problems?

•  Incorrect employer

The name of the employer must be the same as the name of the employer on the claim form. We often see that an employee submits their claims against a building name or a trading name rather than the legal name of the employer. If during the course of the EC the employee discovers the true name of his employer there is no prescribed method of changing the name on the EC form. It may well be that when the claim is reached at the Employment Tribunal it could be struck out for not conforming to the EC certificate. ACAS suggest that an Employment Tribunal will take a constructive approach to the issue. Unfortunately I do not share his optimism and can see claims being struck out in the administration phase, before they reach an Employment Judge.

•  Dragging out EC 

It is clear that EC will benefit those situations where there is a genuine scope to reach a settlement, however there will always be situations where parties are simply poles apart. ACAS do have the power to bring the EC to an end where they feel that there is no longer any scope to settle, however they will not do so where parties are telling them that they are open to settlement (irrespective of their true intentions). I can see that there may be employers who spin out EC in the hope that employees get bored or find a new job making the bringing of a claim no longer commercially viable. Alternatively I can also envisage employees spinning out EC so that by the time they come to submitting their claims they have been out of employment long enough to claim a remission on their ET fees.

•  Representatives

The ACAS EC form contains no space for an employee to name his representative and therefore contact will always start with the Employee.

•  Information obtained in EC

Anything said in EC will be deemed to be “without prejudice” and should not therefore be referred to in any consequent litigation. This raises potential problems where one party concedes an important point which the other then attempts to use in its claim or response, which consequently will give rise to more litigation in the Tribunal.

The most recent Tribunal statistics as at 13 March 2014 show that the number of claims issued from October – December 2013 is 79% lower than the same period in 2012 and there is no doubt in my mind that this is mainly due to the introduction of fees in the Employment Tribunal, the raising of the length of service from one year to two for unfair dismissals and other recommended changes championed in the removal of the ‘red tape’ surrounding employment law. With the introduction of EC I am left wondering whether the ‘red tape’ has actually been removed or whether it has simply been unloaded onto employees.

Only time will tell whether the Early Conciliation will be a success or failure, what is certain is that it is here to stay for the foreseeable future.

For more assistance and guidance on EC, or any other employment related query please contact our Employment Team on 0113 203 1999 or visit our website. 

Lee Carroll, Solicitor for Rebian Solicitors

MARITAL PROPERTY AGREEMENTS

PRE NUPTIAL AND POST NUPTIAL AGREEMENTS

It is somewhat perverse you may think that in an ideal world, when parties are in love and  wish to spend the rest of their lives together, that ideas of considering financial planning should the relationship fail takes the romance out of the relationship before the ink is dry on the marriage certificate.

However, by amicably resolving such difficult financial matters prior to the marriage or within a successful marriage or civil relationship, can save heartache and expense should the relationship sadly break down in the future.

Last month the Law Commission proposed that Marital Property Agreements (MPA`s) should be legally binding.

An online survey conducted by Alex Porter with the University of Essex has shown that the popularity of MPA`s is rising, with an increase of 73% in their use over a 20 year period. In the last 12 months 79% of respondents completed between one and five MPA`s per month.

The survey also revealed that very few MPA`s are applied in full once they get to court. It ranges 5% of cases were the court applied the terms of the MPA in full, 76% reported that the court applied the terms of the MPA in part and in a reported 19% of cases no terms of the MPA were applied to the settlement of the financial matter.

Given the proposal of the Law Commission are these statistics going to change in the future.

This blog provides a brief overview of the ever increasing usage by couples of Pre and Post Nuptial Agreements.

Pre Nuptial Agreements are becoming an increasingly popular way of couples making provision, prior to marriage or civil partnership, as to how their property is to be divided should their marriage or relationship breakdown.

A Post Nuptial Agreement is an agreement made after marriage or civil partnership to settle issues, such as, maintenance, child support, division of property in the event of the marriage or civil partnership breaking down.

Presently, neither agreement is legally binding in the courts of England and Wales, as you cannot override the ability of the court to decide how to divide your finances upon breakdown of your relationship. However, upon any application for financial remedy the courts must give weight to a Pre Nuptial or Post Nuptial Agreement as a relevant circumstance of the case.

The Legal background to the stance of the Court was discussed in the case of Radmacher v Granatino in October 2010.  The court will consider the circumstances of each case individually and when one of the circumstances concerns a Pre Nuptial Agreement then the court will consider:

I.            Whether there has been full and frank financial disclosure;

II.            Whether the agreement was entered into good time, preferably at least 6 weeks and certainly no less than 21 days before the wedding or civil partnership ceremony;

III.            Whether there has been undue influence on either party; and

IV.            Whether any independent legal advice has been taken by each party.

However, a Post Nuptial Agreement is binding unless there is good reason for them to be void or unenforceable, such as, when the agreement restricts a person`s right to apply to the court in circumstance where there has been misrepresentation or undue influence. Therefore, such agreements need to be:

I.            Freely entered into by both parties;

II.            Both parties need to be properly advised;

III.            Understood in terms of their effect by and upon both parties;

IV.            Fair;

V.            Subject to full and frank disclosure by both parties.

The advantages of the Agreements are that they offer both parties:

• Clarity regarding ownership of any particular property, certainty as to how your finances will be divided upon separation or divorce;
•  Transparency of each parties financial position due to full and frank disclosure;
•  Protection of assets, debt protection, protection of family members eg child from a previous relationship;
•  Reduced acrimony as both parties have reached agreement prior to breakdown in the marriage;
• Protection of business partners;
•  Provision upon death;
• Freedom for a party to negotiate their own terms of agreement.

However, there are also disadvantages of entering into an agreement:

• Vulnerability of an economically weaker party;
• Mistrust;
• Not legally binding;
• Changes in circumstance;
• Review;
• Inheritance issues;
• Legal fees.

Despite the clear advantages and disadvantages expressed above, by ensuring that you each of you engage with a solicitor who is an expert in the drafting of these agreements, then both parties will receive specialist advice and support in ensuring that a fair agreement is negotiated to the satisfaction of both parties.

If you require any advice than contact Ian Dixon on 0113 203 1999 or 07590 495 067

Alternatively, leave a message on our Rebian Family Law Facebook page or suggest any areas of law that you would like us to cover