Can You Own Multiple Franchises?

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If you have franchised your business, then you may be looking to establish multiple franchises.

It is possible to own multiple franchises, however, managing more than one franchise has a multitude of considerations and a distinguished level of commitment compared to running a business or owning a singular franchise.

The main factors to consider are:

Compliance with the Franchising Code
Franchising documents
Confidentiality
Liabilities
Competition in the market

Before you decide to take on multiple franchises, it’s a good idea to understand how much responsibility this entails and whether your business has the capacity to take on it – read on to find out more.

Can You Own Multiple Franchises?

Yes, you can own multiple franchises. As a franchisor, you can have multiple franchises of your business in different locations. Your franchisees don’t have to be different people for each franchise location as well. In other words,one franchisee can have multiple franchises to their name.

However, this means you’ll need to take on a few more responsibilities. Owning multiple franchises means you’ll have a franchise network.

How To Manage A Franchise Network

Managing a franchise network essentially requires being on top of all the relevant business and legal aspects. All documents need to be updated regularly, and as the franchisor, it’s important to keep your franchisees in the loop at all times.

We’ve mentioned some of the most important documents you will need to keep in check below.

Operations Manual

The Operations Manual is the instrument that details key aspects of your franchise. So, keeping the operations manual up to date is imperative. An operations manual can include information around:

The business’ finances
Business module
Marketing
Equipment
Key personnel in the franchise
Suppliers
Premises and location
Best practices methods
Products and services
Contact information
Emergency procedure

Essentially, franchisees will be given an Operations Manual when they first purchase the franchise. It’s a good introduction to the franchise as a whole and is one of the first steps in the training or onboarding process.

Disclosure Document

When selling, renewing or extending a franchise, you need to provide potential franchisees with a Disclosure Document.

A Disclosure Document will include matters such as:

Details about the franchise itself
How much it currently costs to run the franchise
Any legal proceedings the franchise may currently be facing
Contact details
The process for when the contract between the franchisor and franchisee ends

If you are running multiple franchises, keeping this document up to date will allow your current and potential franchisees to assess the business’ affairs and make an informed decision before purchasing, renewing or extending the franchise term. .

Therefore, it’s crucial your disclosure document accurately reflects your business. A legal professional can review your documents and aid you in updating this information – chat to our team of legal consultants to learn more.

Information Statement

The information statement is a document that all franchisors should provide to potential franchisees. If someone expresses interest in becoming a franchisee of your business, then provide them with this information statement as soon as possible and no later than seven days after being approached by them about the business.

Franchise Agreement

The Franchise Agreement is the contract between a franchisor and their franchisee. It details key aspects of the arrangement, such as responsibilities of the parties, fees to pay and how disputes will be handled.

A Franchise Agreement will look different for each franchise as it should be drafted based on the business’ requirements and specific needs.

When drawing up a Franchise Agreement, it’s worth considering your obligations under the Franchising Code. Read on to find out more.

Obligations Under The Franchising Code

The Franchising Code regulates franchises in New Zealand. It’s important to keep up to date to ensure you remain compliant.

When interpreting the Code, it’s wise to seek the advice of an expert lawyer who can help you understand which rules apply specifically to your business and how you can best demonstrate compliance.

What Should I Know About Franchisor Liability?

Franchisors possess liability over their franchisee’s action to a certain degree, despite the fact that they may not be personally running the business in that particular location. In other words, franchisors need to take responsibility for their franchisees’ actions in certain situations.

Therefore, if misconduct occurs and it is found that one of your franchisees was breaching workplace laws (for example, for not providing a safe working environment, underpaying staff or mistreating the employees), the franchisor can be held liable.

As a franchise, this is the last thing you want as it could cause some permanent damage to your reputation and position in the market.

Therefore, turning a blind eye is not an option and it is crucial that you, as the franchisor, are ensuring all you franchisees are acting in compliance with the workplace laws.

Marketing Fund

Owning multiple franchises means you may choose to have a shared fund dedicated to your marketing efforts. After all, running multiple franchises will require higher levels of exposure in the market. This is known as your marketing fund.

A marketing fund essentially keeps money aside for your marketing activities.Two key factors need to be in place when creating a marketing fund:

The franchisees must be provided with a statement regarding the transactions of the fund and any relevant related information
Unless 75% of the franchisees vote against it, the statement must be audited by a registered company auditor

If you’re thinking of opening a shared fund to market your business, it’s in your business’ best interest to see a legal professional to ensure it’s being handled correctly.

Key Takeaways

Establishing multiple franchises for your business means you will be running a franchise network. It’s important to keep up with the legal aspects of your franchise network in order to avoid disputes or financial penalties towards your business.

We have a number of resources you can refer to at various stages of the franchising process:

If you would like a consultation regarding any of your franchise documents, regulations or franchising laws generally, you can reach our legal team at 0800 002 184 or [email protected] for a free, no-obligations chat.

Sapna Goundan

Sapna has completed a Bachelor of Arts/Laws. Since graduating, she's worked primarily in the field of legal research and writing, and she now writes for Sprintlaw.

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