Hamilton Pratt

Direct Franchising in the UK

Direct franchising is generally only possible when:

  • a relatively small number of franchisees are to be appointed.
  • the franchise is “simple” so that franchisees can be trained easily and there is no constant need for assistance.
  • the target country is both geographically and culturally similar to the country of the “home” business.

The advantages of direct franchising are:

  • the franchisor has, in theory at least, substantial control over franchisees because there is a direct contractual link between the franchisor and the franchisee.
  • there are no formalities although in countries which regulate franchising the fact that the franchisor is “foreign” will not relieve the franchisor of the obligations to comply with regulations.
  • it is potentially more profitable than other forms of franchising because the franchisor does not have to “share” its profits with any intermediaries.

The disadvantage of direct franchising are:

  • it is an essential element of franchising that the franchisor provides adequate consultation, back up and assistance and in most cases this will not be possible if the franchisor is situated in another country.
  • the franchisor may have little information and knowledge about the target country.
  • difficulties may arise in enforcing strict adherence to the franchise agreement and manual if the franchisor is resident in another country and is as a result unable to exercise day to day control.
  • prospective franchisees, bankers and suppliers may be sceptical about the foreign franchisor’s commitment if direct franchising is used.

By reason of the above it is unusual for a franchisor to seek to expand by direct franchising. In Europe direct franchising occurs most commonly between the United Kingdom and the Republic of Ireland, France and Belgium, within Scandinavia and between Germany and Austria.