ABOUT THE CONTRIBUTOR

Simone Pentis
Simone Pentis Simone Pentis is the Managing Director, Advantage Partners Lawyers & Corporate Counsel, The Coffee Club Group. Simone is a specialist corporate & commercial lawyer, with a particular focus on franchising, intellectual property and business sales. Simone has advised private individuals, council, public & private companies throughout Australia & overseas, acted for established national & international franchisors. Simone has been involved in the design & establishment of various franchise systems, as well as the management of these companies daily legal issues. Simone has for a number of years held the position of elected committee member of the Franchise Council of Australia’s ('FCA') Qld Chapter Committee & the Chair of their Legal sub-committee. Simone also is an appointed committee member to the Qld Law Society’s specialist Franchising Committee. Simone has in Australia and internationally given and/or organised conferences, presentations and facilitated discussions on various legal, contract, intellectual property, franchising, sponsorship, marketing and business topics, as well as having been invited to repeatedly speak on 4BC radio.

Simone Pentis has written 42 article(s) for us.

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Company Owned vs Franchised Operations – What Does This Mean?

May 8, 2017 | Simone Pentis

Generally, from my experience if you operate within a franchise system, most stores, outlets and/or operations will be franchised rather than company owned. While a few franchise systems take a different approach and have relatively equal numbers of franchised and company owned operations, this tends to not be the common practice, especially as a system and its network grows.

Whether a system does have an equal number or lesser number of company owned operations versus franchised operations does not mean that a franchise system is better and/or has more risks than another system or network.

There are a number of reasons why the choice is made as to the relevant numbers of franchised operations versus company owned operations, and this choice may change as a system and network changes.

Arguably, the business focus and resourcing required and available will be a key factor (or at least, should be a key factor) in regards to what choices are made by the relevant franchisor from time to time.

More often than not, we have seen that franchisors tend to avoid taking on “Franchisor” and “Franchisee” roles, by choice or necessity due to the additional resources and focus required to take on both roles. Where we have seen company owned operations, more often than not these seem to be the result of a Franchisor seeking to:

  • have operations or sites that have an additional purpose to enable franchisees to undertake training at these controlled sites and/or the ability to trial and test new products, services, processes and/or systems before any roll outs to various franchisees;
  • control key locations and/or sites;
  • take up an opportunity when franchisees are not available, with the goal to turn the the operation into an existing business that can then be on sold; and/or
  • take back an existing franchised operation due to unforseen issues that have arisen.

Given the above, we suggest:

For Franchisors: – They should make a considered approach that they regularly review to ensure that they have (and continue to have) the right mix, and that they have the dedication, resources and ability to carry through with their strategies, whether this be franchised or company owned operations.

For Franchisees: – Before entering into or renewing their franchise they ensure they do a proper due diligence into their Franchisor, system and network to work out the Franchisor’s vision, focus, strategies, and whether the Franchisor has the resources, ability and dedication to carry this through for the benefit of their franchisees.

Please note this does not purport to be comprehensive advice relevant to your circumstances. Consequently, specific legal advice for each of your circumstances should be obtained first before taking or not taking any action in respect to this area.