Q.

Can I Invest in a Franchise With a Business Partner?

Author: Shelley Nadler

answered by Shelley Nadler

Legal director at Bird & Bird

Shelley Nadler writes:

You can. However, the partner will have to be assessed by the franchisor in the same way you will be in order to ascertain their suitability for the franchise.

You may decide to set up a limited liability company, so that the finances of the franchise are kept separate from your own. You will need to incorporate the company at Companies House.

You and your business partner would be directors and shareholders of the limited liability company. A shareholders’ agreement between you and your business partner would deal with how profits will be distributed (or losses) and what will happen if one of the shareholders wishes to leave the business.

If you choose to operate the franchise as a partnership, you and your business partner will need to be parties to the franchise agreement. Each partner will be individually and jointly liable for the franchisee’s obligations under the agreement and to any creditors.

If you’re going to run your franchise through a partnership, you will need to enter into a partnership agreement with your business partner, which will regulate how the partnership is operated.

Another option is to set up a limited liability partnership. In an LLP, each member shares in the risks, costs, responsibilities and profits of the business.

Partners’ liability is limited to the amount of money they have invested in the business. LLPs must be registered at Companies House.

Shelley Nadler is a legal director in Bird & Bird’s international franchising team and has many years’ experience of advising on all aspects of franchising.

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