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I’m a franchisee with one brand, but I’m looking to invest in another. What should I tell my current franchisor – Am I duty-bound to inform them at all?
Louise harris writes:
It’s good to see a franchisee looking to expand – especially when they see the value of franchising. It is not uncommon for franchisees to invest in several brands, but it is critical to consult the franchise agreement before doing so.
Many franchise agreements prohibit involvement in another business – not just franchises – usually when the franchisee is required to be active in their franchise. In this case, it’s probable that you would not be able to apply ‘full effort’ if you worked in another business at the same time.
You should discuss this with your franchisor whether the contract prohibits it or not. Honesty, as always, is the best policy. It is probable that your franchise agreement makes you ‘legally bound’ to communicate any involvement, but it is also in your interest to do so – your franchisor may be able to guide you on other options. If your plan is solely to invest, discuss this with your franchisor.
It is important that any other business involvement does not create any conflict with your existing franchise – if there is a common customer base, for example, you will not be allowed to use the data from one business to advertise another, for example. And if the business is a competitor, it will be a non-starter – and may leave you in breach of your franchise agreement.
Louise Harris has been in franchising since 2006 and has been both franchisee and franchisor. She runs Franchise Projects, completing critical tasks for franchised businesses.
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