Franchise Q&A Q&A


[Q] My franchisor is asking for a deposit – what is this for?


[BIO] ALAN


WILKINSON is a franchise


development consultant at The Franchise Development Centre


expenses. A franchisee should therefore confi rm what expenses will be incurred that would come out of the deposit should they subsequently change their mind and not progress with the purchase of the franchise, as they are unlikely to get the whole amount back. My advice to any prospective franchisee is not to part with a deposit until you are absolutely sure that the franchise you are looking at is right for you, and only once you have completed a thorough and full investigation of the business.


[A] By the time you get to a deposit stage in the franchise recruitment process,


you should have been through a thorough and rigorous due diligence process. This will have included several meetings, telephone discussions, contact with existing franchisees, and preparation of business plans and fi nancial forecasts. This process will have been time-consuming for both parties, and there comes a time when a decision must be made one way or the other; pay a deposit, or walk away. The payment of a deposit, together with a signed letter of intent to proceed is important for several reasons. Firstly, it shows that the franchisee is serious about taking on the franchise, and thus the franchisor can spend more time and perhaps start to incur further costs, in the preparation of the launch of the franchisee. Secondly, it will secure the territory for the franchisee for a period of time, typically 30 or 60 days, whilst further preparations are made, or perhaps whilst the franchisee is working out his notice, or waiting for funds to become available. According to bfa guidelines, a deposit should be refundable, minus any third-party


[Q] Are franchisees protected if their franchise agreement proves unfairly biased towards the franchisor?


[BIO] JOHN


PRATT is a partner at Hamilton Pratt Business and


Franchise Solicitors


[A] Unfortunately franchise agreements are always biased towards the franchisor


because they are prepared by the franchisor’s lawyers to protect the franchisor – bearing in mind that the franchisor is allowing franchisees to use its brand and all of its valuable commercial information, that is understandable. Having said that, the Unfair Contract Terms Act


May 2012 | Businessfranchise.com | 23


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89  |  Page 90  |  Page 91  |  Page 92  |  Page 93  |  Page 94  |  Page 95  |  Page 96  |  Page 97  |  Page 98  |  Page 99  |  Page 100