There is no standard form of franchise agreement with standard franchise terms. Every franchise arrangement will be unique, as each franchise relationship and the appropriate franchise terms and conditions will vary significantly depending upon the type of business, the industry, and the particular franchisor.
Franchise terms that are generally covered by a franchise agreement include:
- Term and option for renewal. It is important to know how long the franchise lasts, and whether and on what terms you have the option to renew it
- Termination and cancellation. There may be limited avenues to terminate or cancel the agreement
- Exit and sale. The agreement will address what happens if you wish to exit or sell the business in the future. It will likely give the franchisor substantial influence in selecting the purchaser and may include options for the franchisor to buy back the franchise
- Fees and costs. The initial franchise fee is only one of many possible costs. There will generally be substantial initial investment. The ongoing management fees, generally expressed in terms of a percentage of sales revenue, can be substantial. Other costs payable by you and how they are worked out should be carefully examined and financial advice sought
- Location and territory. The agreement will set out where the franchisee can operate and any exclusivity rights
- Operations. The agreement will set out how the franchise is to be run and what responsibilities fall on the franchisee and the franchisor respectively
- Restrictions. The agreement will usually specify how you must run the business and impose restrictions on what you can and cannot do
- Training and ongoing support. The agreement should outline training to be provided, and ongoing administrative, technical and other support
- Intellectual property. The agreement will set out how the franchisee can use the trademarks, patents, logos, etc of the franchise
- Advertising and marketing. The agreement will set out what advertising the franchisor will provide, and the associated costs
It is essential to seek legal advice before signing a franchise agreement or paying any fees or deposit. The franchise agreement is a legally binding contract and you will be bound by its terms once you have signed.
If you would like to obtain legal advice on franchise terms, Caven can put you in touch with a local specialist franchising solicitor free of charge. So, if you have any questions or would like our help in finding a local franchising solicitor please call us on 08001 221 2299 or complete the web-form above.
- Last Updated on 02/03/2010