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Confidentiality and Deposit Agreements

What is a confidentiality agreement?

A confidentiality agreement (or non-disclosure agreement (“NDA”) is an agreement entered into between two parties which allows either “one way” or “two way” disclose of information that the recipient is then legally obliged to keep confidential.

Why are confidentiality agreements used in franchising?

It is common for franchisors to ask prospective franchisees to sign a one way confidentiality agreement prior to the franchisor disclosing to the prospective franchisee confidential information in relation to the franchise. Otherwise, if such a disclosure is made and the franchisee does not proceed with the franchise, the prospective franchisee then has the benefit of the franchisor’s confidential information which could be used to set up a competing business.

What happens to the confidentiality agreement if a franchise agreement is subsequently signed?

The franchise agreement will usually contain detailed provisions in relation to confidentiality and non-compete so the earlier confidentiality agreement will essentially fall away, meaning that it is no longer required.

What is a deposit agreement?

A deposit agreement (or deposit letter) is an agreement entered into between the franchisor and prospective franchisee setting out what deposit is to be paid by the prospective franchise and on what terms, mainly whether it is refundable and on what basis.

Why are deposit agreements used in franchising?

It is advisable for both the franchisor and prospective franchisee to enter into a formal deposit agreement to avoid any misunderstanding about the terms on which the deposit is paid and, in particular, in what circumstances it is refundable.

If you need any advice on confidentiality and deposit agreements, please contact a member of our team in confidence here or on 02920 829 100 for a free initial call to see how they can help.


To speak to one of our experts today, please contact us on 02920 829 100 or by using our Contact Us form for a free initial chat to see how we can help.

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