Franchise Agreements As a Franchisee, what terms would you expect to see? It may come as a surprise that there is no legislation specific to franchising in the United Kingdom. As a consequence a franchisor is at liberty to strike whatever bargain it wishes with its franchisees. While that bargain will be subject to common law principles and the plethora of existing legislation governing commercial relationships, it is the franchise agreement itself that will set out the terms of the relationship between the parties. Such agreements are always heavily weighted in favour of the franchisor, (and this is necessary to protect its interests) but it is reasonable to expect the agreement to be fair to the franchisee as well. As a franchisee you should expect the franchisor’s standard franchise agreement to contain the following provisions: A fixed term – the length of term varies from franchise to franchise and is often related to the level of the initial purchase price and/or the level of fees payable A right to renew the term, which will be subject to certain conditions being met. It will be important to ensure the right to renew is not lost due to any trivial breaches of the agreement. If the franchisor imposes minimum performance targets, consider whether these are appropriate, especially if based on the performance of other franchisees A clearly identified territory and the rights connected with that territory e.g. is it exclusive and does the franchisor, or other franchisees, have rights to operate in the territory in certain circumstances? A right to use the franchisor’s intellectual property, that is, the franchisor’s name, brand and know how and a warranty from the franchisor that it is entitled to licence such intellectual property Confirmation that the franchisor has taken appropriate steps to secure its intellectual property to protect the brand and prevent infringement of its rights Obligations on the franchisor to provide training, to assist with the business set up, to assist in identifying the right location of premises, to supply or identify suppliers for equipment and stock, to provide ongoing support A right to sell the franchise in the company owning the franchise business. This right will be subject to certain conditions, which will need to be checked to ensure they are reasonable and will not unreasonably affect the right of sale A contingency plan that would deal with the situation should the franchisee become ill or die. Bear in mind that your family or personal representatives will want rights to either sell the business or take it over These are just a handful of the many issues that franchisees are advised to check in their franchise agreement. The issues can be complex and overlap with other provisions of the agreement so legal advice from a specialist is indispensable. Franchise UK work in partnership with franchise law experts Birkett Long Solicitors to give potential franchisee's and franchisor's help and guidance with franchise agreements. Copyright Franchise UK Franchise UK
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