Starting a Franchise in Singapore: What Franchisors Should Look Out For
In this article on franchising, we will discuss the benefits of starting a franchise and what to look out for as a franchisor in Singapore.
Why Should I Start a Franchise?
There are several benefits associated with franchising your business. For example, if you need to raise capital, franchising may be a more cost-effective method compared to selling equity or raising a loan.
Franchising is also an efficient way to grow your business. Since your franchisee would be incentivised to properly manage and grow his franchise unit due to the significant investment of capital he has made in it, in turn, your business performance would improve.
Furthermore, franchising would also allow you to tap on the local market knowledge of your foreign franchisees.
The commercial environment in Singapore is fairly friendly to a franchisor as there is a lack of specific franchising laws here.
However, to ensure the smooth operation of the franchise system, you should be aware of the potential legal issues relating to franchising, of which some are canvassed below.
What are Some Legal Issues I Should Consider?
Register your trade mark
Since it is your intellectual property that is of value in your franchise, you should protect it via the legal means available.
You should register your trade mark so that you can exploit it, by licensing it for use by franchisees for commercial returns.
When you have registered your trade mark, you will have the exclusive rights to use the trade mark and to authorise other people to use the trade mark, in relation to the goods or services for which the trade mark is registered.
Generally, if someone else subsequently uses an identical or a confusingly similar sign in the course of trade in relation to identical or similar goods or services without your consent, you will be able to sue him under the Trade Marks Act for the infringement of your exclusive right.
The franchising agreement should ensure that, upon its termination, the franchisee’s right to use your intellectual property similarly terminates.
Draft an indemnity clause
Depending on the legal nature of your relationship with the franchisee, it is possible that you may be held vicariously liable for the acts or omissions of the franchisee, for example if the franchisee is considered to be your agent, in law.
One possible way to protect yourself from such liability is to provide in the contract that the franchisee is to indemnify you for any third-party claims made against you because of the franchisee’s acts or omissions.
However, this method would be ineffective in the event that the franchisee goes bankrupt.
Ensure compliance with relevant local regulatory laws
To ensure the validity of your franchising agreement, you should ensure that it complies with all relevant local regulatory laws.
For example, generally, you should ensure that your franchise agreement does not promote anti-competitive practices or the offending provisions may be rendered void by the Competition Act.
Also, generally, clauses which are in restraint of trade, such as clauses which prohibit the franchisee from carrying on a competing business, should be reasonable in scope and duration, or they may be rendered void.
While the Franchising and Licensing Association (Singapore)’s Code of Ethics is not a legally binding document, it may be useful to refer to it to get an idea of the standard of conduct expected of a franchisor.
Although there are costs associated with setting up a franchising structure, franchising is a proven business model that has powered many brands in their expansions.
Should you require assistance in setting up a franchise, feel free to engage our corporate services offered at competitive rates. If you’re looking for legal advice on the legal issues that your franchise may encounter, please consult one of our experienced corporate lawyers.
- Appointing Company Directors in Singapore: Eligibility, Process etc.
- Managing Director vs CEO in Singapore: Roles and Obligations
- Guide to Directors' Remuneration in Singapore
- Directors' Duties in Singapore
- Shadow Directors: Who are They and What Duties Do They Owe to the Company?
- How to Remove a Director from a Company in Singapore
- Removal and Resignation of Company Auditor in Singapore
- Appointing a Company Secretary: Roles and Responsibilities
- Appointing an Authorised Representative for Foreign Companies in Singapore
- Process Agents in Singapore
- 2 Ways to Remove a Singapore Company Shareholder ASAP
- Guide to Paid-Up Capital in Singapore (Is $1 Enough?)
- Preparing a Register of Shareholders for a Singapore Company
- How to Issue Shares in a Singapore Private Company
- Guide to Transferring Shares in a Singapore Private Company
- Your Guide to Share Certificates in Singapore: Usage and How to Prepare
- Shareholder Rights in Singapore Private Companies
- Shareholder Roles and Obligations in Singapore Companies
- Dividend Payments Guide for Singapore Business Owners
- Share Transmission: What Happens If a Shareholder Dies in Singapore?
- How to Reduce the Share Capital of Your Singapore Company
- Buy-Sell Agreements: How to Write & Fund Them in Singapore
- Oppression of Minority Shareholders
- Essential Regulatory Compliance Guide for Singapore Companies
- Dormant Companies and Their Filing Obligations in Singapore
- Anti-Money Laundering Regulations and Your Business: What You Need to Know
- Price-Fixing, Bid-Rigging and Other Anti-Competitive Practices to Avoid
- Legally Conducting Lucky Draws for Singapore Businesses
- Restaurant Inspection and Food Safety Rules in Singapore
- Does Your Company Need a Legal Team (In-House Counsel)?
- How to Change the Name of Your Singapore Company
- Can Directors be Liable for Company Debts in Singapore?
- Company Loans to Directors/Shareholders in Singapore
- 3 Types of Insurance Every Singapore Business Needs
- Creating and Registering Charges in Singapore: Guide for Companies
- Guide to Effective Business Continuity Planning in Singapore
- Business Asset Sale & Disposal in Singapore: How Do They Work?
- Business Partnership Disputes in Singapore: How to Resolve
- How to Commence a Derivative Action on Behalf of a Company in Singapore
- Business Will: How to Pass on Your Business to Your Successors in Singapore
- Record-Keeping Requirements for Singapore Companies
- Company Constitutions in Singapore and How to Draft One
- Company Memorandum and Articles of Association
- Company Resolutions: What are They?
- Board Resolutions in Singapore
- Minutes of Company Meeting in Singapore: How to Record
- How to Set Up a Register of Controllers
- How to Set Up a Register of Nominee Directors
- Guide to Filing Financial Statements for Singapore Business Owners
- Filing Annual Returns For Your Business
- Singapore Corporate Tax: How to Pay, Tax Rate, Exemptions
- Start-Up Tax Exemption Guide for New Singapore Companies
- GST Registration: Requirements and Procedure in Singapore
- What is Withholding Tax and When to Pay It in Singapore
- Singapore Influencers: Here's How to Calculate Your Income Tax
- Tax Investigation of Tax-Evading Business Owners in Singapore
- Small Business Accounting Services in Singapore
- Company Audits in Singapore: Requirements and Exemptions
- Suspect a PDPA Data Breach? Here's What to Do Next
- Must You Notify PDPC About a Data Breach in Your Business?
- Summary: Your Organisation's 10 Main PDPA Obligations
- Essential PDPA Compliance Guide for Singapore Businesses
- PDPA Consent Requirements: How Can Your Business Comply?
- Is It Legal for Businesses to Ask for Your NRIC in Singapore?
- Here's a 7-Step Plan for Companies to Prevent Unauthorised Disclosure When Processing and Sending Personal Data
- Cloud Storage of Personal Data: Your Business’ Data Protection Obligations
- GDPR Compliance in Singapore: Is it Required and How to Comply
- Appointing a Data Protection Officer For Your Business: All You Need to Know
- How Can Companies Dispose of Documents Containing Personal Data?
- Check the Do-Not-Call Registry Before Marketing to Singapore Phone Numbers
- How to Legally Install CCTVs for Home/Business Use in Singapore
- Is Web Scraping or Crawling Legal in Singapore?
- Legal Options If Employees Breach Confidentiality in Singapore
- Dealing with Defamation of Your Business: Can You Sue?
- Sending Email Newsletters That Comply With Singapore Law
- A legal guide to drafting a social media policy for your company
- Your Guide to a Media Release Form in Singapore
- Your Guide to an Influencer Marketing Agreement in Singapore
- Outdoor Advertising: How to Legally Display Public Ads in Singapore
- Voluntary Suspension of Business in Singapore: How to Handle
- Winding Up a Singapore Company: Grounds and Procedure
- Closing Your Singapore Business: What You Need to Settle
- Striking Off a Company
- Can a Company that Struck Itself Off the Register Later Apply to Restore Itself?
- Dissolution of partnerships in Singapore
- What Should a Creditor Do When a Company Becomes Insolvent?
- How to File a Proof of Debt Against a Company in Liquidation
- Insolvency: Claw-Back of Assets From Unfair Preference and Undervalued Transactions
- Validation of Payments Made by Companies Being Wound Up