I’m considering buying a franchise with a close friend. What’s the best way of going about it?

Alan Wilkinson writes:

It’s quite common for two friends to go into business together and the mechanism of doing so is a simple process.

Some franchisors insist the
franchisee sets up a limited company and others will allow a sole trader or partnership arrangement. Either way, the two parties to the agreement set up a company, incorporated or not.

This may be a 50-50 partnership or shareholding in favour of one or the other partners. It’s this company that contracts with the franchisor and it’s the company that is the franchisee, rather than the individuals.

In the case of a limited company, one person will be named as the principal and have ultimate responsibility for the operating of the business and any personal guarantees required.

It’s often the case that one partner may provide the funding and one partner may operate the business. It’s also common that one partner may be good at sales and marketing and one may have a more operational skill set.

However, if the skill sets of the partners are similar and there are some things that neither of them are good at, it’s important the franchisor’s training and support can fill this skills gap.

Alan Wilkinson is head of franchise development at The Franchising Centre and has been in franchising for over 25 years.