What-Franchise-Issue-20.3

legal and financial structures to manage sub-franchisees effectively,” says Maria. “Master franchisees operate under a master franchise agreement, which grants them the rights to develop and sub- franchise within a defined territory,” adds Emily. “They must also have a robust sub-franchise agreement that aligns with the original franchisor’s terms while ensuring compliance with UK regulations. Although franchise law in the UK falls primarily under contract law, master franchisees must also navigate competition law, intellectual property protections, data protection regulations, and consumer rights laws. Acting as intermediaries between the franchisor and sub- franchisees, they need clear contractual obligations to manage their legal and operational responsibilities effectively.” How do joint ventures or partnership-based franchise agreements work in practice? “In a joint venture franchise, the franchisor and franchisee create a new legal entity, often a limited company, where both hold equity and share in the profits and responsibilities. This entity operates the franchised business,” explains Emily. “A partnership-based model, on the other hand, involves the parties entering into a legal partnership, governed by a formal agreement, to run the business together.” “A detailed partnership agreement is essential,” advises Maria. “It should clearly define ownership percentages, management responsibilities, decision- making authority, and operational roles. Profits, losses, and risks must also be distributed according to pre-agreed terms to protect all parties involved.” “These structures also give franchisees greater influence over business operations and decision-making compared to a traditional franchise model,” Emily notes. “However, they come with risks, such as disputes over control, profit-sharing, and long-term strategy.When structured well, they can lead to significant financial rewards and a closer working relationship with the franchisor.” For franchisors, this model can be particularly beneficial when expanding into new regional or international markets. “Partnering with individuals who have local market expertise – such as knowledge of consumer behaviour, regulatory environments, and cultural nuances – allows the franchisor to maintain control while leveraging local insights. Some brands, likeVelvet Taco, have successfully used this approach to accelerate expansion,” points out Maria. How do you define a territory? “In the UK, the franchise territory must be defined in clear, unambiguous terms – typically using maps, postal codes, or detailed descriptions,” explains Maria. “This ensures both franchisor and franchisee understand operational boundaries.” Poorly defined territories can lead to disputes. “Although equal-sized territories may seem fair, factors like demographics and geography determine sales potential,” she adds. Many franchisors use mapping software, and franchisees have the right to request these maps to assess market potential. Performance targets should be reasonable and achievable within the defined area. Exclusive territory clauses protect a franchisee’s market share by preventing the franchisor from opening additional outlets or granting overlapping rights,” continues Maria. “If exclusivity is not granted, the franchise agreement must clearly outline “In the UK, the franchise territory must be defined in clear, unambiguous terms – typically using maps, postal codes, or detailed descriptions – to ensure that both franchisor and franchisee understand operational boundaries” - Maria Misyurina, co-founder of Franchising Guru 30 WHAT FRANCHISE Issue 20.3