How to buy a franchise
If you are looking at a potential franchise to buy, franchise agreements should be considered. Franchise agreements set out the rights and obligations of both the seller (‘the franchisor’) and the buyer (‘the franchisee’). Before the franchisee commits to buy, franchise agreements used by the franchisor must be inspected and agreed upon. This is because the franchisor might insist upon some stringent terms.
For example, the franchisor may stipulate a minimum term for the franchise agreement. This typically ranges from five to over thirty years. If the franchisor is insisting on a lengthy term, the franchisee should carefully consider whether they are able to offer such a commitment. If they are not, they should not buy the franchise. This is because if they did buy the franchise and subsequently wanted to end the agreement prematurely, they may face huge payouts for breach of contract.
Before committing to buy, franchise agreements should be shown to a legal advisor. Often commercial lawyers will be able to give potential franchisees a clear picture on the pros and cons of the potential purchase of the franchise. They will also be able to advise on the legal implications of being party to a franchise agreement. The terms of the agreement may also be able to be negotiated.
Both the franchisor and franchisee should instruct their own solicitors. This will ensure that the solicitor are able to act in the best interests of their client and removes the possibility of any conflicts of interest.
If you would like to obtain legal advice and information on buying or selling a franchise, Caven can put you in touch with a local specialist Commercial Solicitor / Franchise free of charge. So, if you have any questions or would like our help in finding local Commercial / Franchise Solicitors please call us on 08001 221 2299 or complete the web-form above.
- Last Updated on 02/03/2010