The franchise agreement is arguably the most important thing to get right in the whole process of becoming a franchisee.
It is normal for an agreement to be written in favour of the franchisor, so it is vital to use a specialist franchise solicitor to review the documentation and explain it to you in plain English. In fact, there is a mandatory 5-day period prior to signing to ensure that the franchisee has had sufficient time to read and understand what they are signing.
Whilst this is a business contract, there are some elements that are unique to franchises so by having specialist support you can be better placed to understand all the implications and nuances of the contract before proceeding. The list to scrutinise is long but here is a quick overview of some of the key points to be mindful of:
- Be clear on with whom you are doing business and research their reputation
- How long does the agreement last? Is it renewable and will you need to pay a fee to renew?
- What are the ongoing fees?
- Who is responsible for advertising, training and the grand opening?
- What is required of you with regards to branding, uniform and décor?
- Are there set operational hours?
- Are you restricted as to where you can purchase supplies from? Can you get a discount by purchasing through the franchisor?
- Are there set policies and procedures to follow?
- Can they sell another franchise to someone else on your territory?
- What happens if it all goes wrong? If you die or get divorced what happens to the business?
- What happens if it all goes great? Can you expand, can you purchase more franchises?
The key take home message is, ensure that you allocate enough time and the correct resources to review any contract prior to signing it. Once it is signed you may be tied in for a long time and it needs to be the right deal for you if you’re going to make a success of it.
If you need help with preparing a franchising agreement please call us on 01993 706403 or e-mail email@example.com.