The Franchise Model
Belvoir’s business model is based on ‘business format franchising’ as defined and accredited by the British Franchise Association (the “BFA”). The BFA is a voluntary organisation and currently the only organisation that provides an accreditation membership based on standards for franchisors in the UK. Of the 900 or so franchise brands in the UK some 30 per cent. are members of the BFA.
Belvoir, as the franchisor, licenses its brand and know-how to the Franchisee, who trades under the Belvoir name, with training and support being provided by Belvoir for the duration of the franchise. The standard franchise agreement states that each Franchisee pays an initial fee to Belvoir plus an on-going Management Service Fee which is a percentage of the Franchisee’s monthly turnover.
Each Franchisee enters into a Franchise Agreement which grants the Franchisee the right to exclusively trade under the Belvoir brand in a clearly identified territory for a 5 year period. Subject to the Franchisee having substantially observed and performed the terms of the Franchise Agreement (and certain other conditions), the Franchisee can choose to renew the agreement for a further 5 years, but at the end of that additional 5 year period there is no automatic right to renew for a further term. However, Belvoir’s policy is usually to offer this and a Franchisee usually accepts; an illustration of the Company’s high rates of franchise retention and renewal. Franchisees renew on the terms of the Franchise Agreement which is current at that time, however, there are only minor differences between the earlier versions of the Franchise Agreement and the current standard Franchise Agreement. Certain Franchisees have agreed amendments to their Franchise Agreement to cater for special circumstances. Through its head office function, Belvoir supports each Franchisee with a three week initiation training programme, a mentor for the first year and training sessions, conferences, newsletters, legal helpline, telephone support, site visits and other media for Franchisees throughout the term of the franchise. Belvoir continues to support and monitor the Franchisee for the duration of the franchise to assist them with business development and growth, as well as to ensure that the Belvoir brand and business model are strictly adhered to.
As each Franchisee operates either as a sole trader, Limited Liability Company or limited liability partnership, and contracts with its clients directly, Belvoir is not contractually liable to a Franchisee’s clients. However, the actions and omissions of the Franchisees may damage the goodwill and reputation of the Belvoir brand, which is why the head office function monitors the performance of the Franchisees, and the Franchise Agreement contains provisions allowing Belvoir to inspect the accounts of the Franchisees and generally assess that Franchisees are adhering to the terms of the Franchise Agreement.