There are many similarities between franchising and licensing and yet, there are many differences as well. Although generalisations are, in the main, to be avoided, licensees will manufacture and sell a branded product under licence from the licensor or owner of the intellectual property (IP) rights, but still retain its own corporate identity and persona. By contrast, a franchisee adopts the persona of the franchisor, often presenting itself as a seamless constituent part of the branded group. For this, one needs to look no further than Starbucks, Kentucky Fried Chicken and The Hilton Hotel Group.
However, what franchising shares with licensing is that the franchisor will have some form of income/royalty participation rights with its franchisees. This could be as varied as a percentage levy on turnover generated by the franchisee, a contribution to a central marketing fund, a requirement to purchase product/raw materials from the franchisor, together with a number of trading undertakings and other stipulations. Definitions within the Franchise Agreement are fundamental and wording precision is essential. It forms the foundation stone for effective audit and, in our experience, a well drafted agreement allows for an audit programme which becomes a profit centre in its own right.
Audits are carried out on a global basis and, through our multi-lingual, multi-cultural teams, we can provide international reach across diverse territories, producing results that quickly lead to significant additional bottom-line revenues for the franchisor. At the same time, we are acutely aware of the key business relationships that exist between a franchisor and its franchisees. Accordingly, we successfully manage the entire audit process in a cordial and helpful manner, leaving such relationships undisturbed.
We can also assist with the drafting of key clauses, making them robust and enforceable.
As with other areas of intellectual property rights exploitation, the financial benefits of a structured franchisee audit programme will speak for themselves.