A franchise agreement is the key legally binding document between a franchisor and franchisee. It sets out the parties’ rights and obligations towards one another for the duration of the franchise term.
As a prospective franchisee, you are likely to be sent a copy of the franchise agreement once you have been through your application and vetting process with the franchisor. Once the franchisor is satisfied that they are happy to bring you into their franchise network, they will typically share the franchise agreement with you.
We would always advise that a prospective franchisee obtains legal advice from an experienced franchise solicitor before you sign on the dotted line. Ideally choose a solicitor who is affiliated to the British Franchise Association, such as ourselves.
Some franchisors will insist that you take legal advice on the terms of the franchise agreement – however even if this is not a requirement we would strongly recommend that you seek legal advice to understand the content of the agreement.
For most people, entering into a franchise is one of the most significant legal commitments (other than buying a house) that they will ever make. It’s therefore very important that you understand what you are getting into.
It’s unlikely that the franchisor will be willing to make many, if any, changes to the franchise agreement. Franchise agreements are usually in a standard form and issued on a “non negotiable” basis. This is primarily to ensure consistency across the franchise network.
However, most franchisors will agree to changes to certain elements which are bespoke to your circumstances. This is usually done by way of a “side letter”, which is a short document attached to the franchise agreement which will record any changes, rather than making amendments to the franchise agreement itself.
Most franchise agreements follow a similar format. They contain a raft of provisions relating to the operation of the franchise provisions, as well as your legal relationship with the franchisor. They are usually quite long documents.
Franchise agreements will vary depending on the sector the franchise business operates in, and the size of the franchisor. However key provisions of a standard franchise agreement include:
The franchise agreement is a key document setting out the legal terms of the relationship between the franchisor and franchisee. However, another key document is the operations manual.
The operations manual is generally viewed as the “bible” of the franchise business. All franchises will have a manual, and it will set out how franchisees must operate the business. This has two key benefits:
A prospective franchisee is unlikely to receive a copy of the manual until after they have signed the franchise agreement, however you may be permitted sight of the agreement at the franchisor’s premises.
It’s important that you have read the franchise agreement carefully yourself.
It may be that the franchisor has agreed to make a concession for you and, if your solicitor is not aware of this, he or she may not spot that it is not in the agreement when they review it.
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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