Keep up to date with the franchise industry and news.
Business Franchise magazine is the essential read for anyone looking to run their own business with the support of an established brand. From household names to emerging franchise businesses, you’ll find a wide range of investment opportunities within its pages, alongside in-depth market reports, real-life case studies, industry news and expert advice to help you make informed decisions about your future in franchising.
As the official magazine of The Franchise Exhibitions, it also incorporates the Show Guide for the only events organised with the full support of the British Franchise Association. Events take place in Birmingham, London, Manchester, Scotland, Online and more! Subscribe today to receive FREE tickets.
The franchise agreement is probably the most important document
You would not buy a house without a survey so
When choosing a solicitor it is tempting to simply choose a local firm or perhaps family solicitor, but unless they have
A solicitor with franchise experience and particularly those affiliated
The solicitor’s job should be to advise a prospective franchisee on the main provisions of the agreement, highlighting what is standard practice and what is not, and to spot glaring omissions and provisions that go too far to be considered ethical. If there are issues arising out of the review these should always be raised with the franchisor, regardless of whether the franchise agreement is stated to be non-negotiable. The franchisor’s reaction to valid points raised can often be telling in itself, providing a clear indication of how they will react to disagreements in the future. What is irritating for a franchisor is where issues are raised as a result of
Some of the key points that a solicitor should consider are:
1 Grant of rights: what rights are being granted and whether these are exclusive or non-exclusive.
2 Term: the duration of the agreement, which must be long enough for the
3 Renewal:is there a right to renew? If so, are the conditions to obtaining renewal fair? These usually include: bringing the business up to the latest standards, signing the latest form of franchise agreement (which may contain higher fees and different terms) and paying the franchisor’s costs. These should be capped if possible. Any renewal fees must be reasonable and not present an obstacle to renewal.
4 Franchisor’s obligations: the level of initial and continuing support being provided by the franchisor. This must justify the fees being charged.
5 Franchisee’s obligations: the scope and nature of the obligations detailing the way in which the business should be run.
6 Right to sell: does the
7 Death and incapacity: does the agreement provide a period of time within which the business can be sold or a beneficiary chosen by the franchise to be nominated to take over the business in the event of the permanent incapacity or death of the
8 Termination: as most termination clauses only allow the franchisor to terminate for the franchisee’s breach, the list of defaults which justify termination must be reviewed to ensure they are reasonable.
9 Non-compete: the agreement usually includes non-compete provisions to stop
10 Operations manual: The franchisor’s operations manual contains the detailed information on operating the business. It is usually incorporated into the agreement and has contractual force. As a franchisor can amend the manual imposing changes on the
There are many other areas of the agreement, which need to be considered and expert advice should be taken. The risk of getting it wrong at a later date must surely outweigh the
Nicola Broadhurst is a partner in Stevens & Bolton.
For more information email nicola.broadhurst@stevens-bolton.com