FRANCHISING
How Turn A Franchise
Agreement To Your Advantage
By: Martin Truman
D
eciding to buy a Franchise is a sential that you understand what you automatic renewal right beyond the
huge decision. Once you have con- are being asked to sign. Once you franchise term of 5 or 7 years? What
vinced yourself that franchising suits have signed an agreement as a busi- renewal fee is payable? Can you sell
your character and business aspira- ness person (without the cotton wool the franchise on? Usually you will
tions, have identified the right fran- treatment given to consumers) you need to give the franchisor first option
chise, done your sums, attended the will struggle to persuade a court later and/or a right of veto over the accept-
initial training and perhaps paid an that the terms were unfair or suffi- ability of any proposed transferee,
initial deposit you will be presented ciently unreasonable to be void. You often coupled with a % fee. What are
with a Franchise Agreement to sign. will be stuck with it! I strongly recom- the consequences of an early termina-
Typically this agreement could run mend that you seek legal advice from tion by you if you want or need to get
to 40 or 50 pages and can be a daunt- a commercial solicitor familiar with out prematurely? There will usually
ing read to those unfamiliar with com- franchising. be a minimum period with forfeiture
mercial contracts. The very nature of Key areas include establishing the of the franchise fee, stock and possi-
a franchise business structure means true cost of the franchise including bly other financial penalties and com-
that the agreement will be fairly com- ongoing royalties, advertising costs, pensation. What if you are in breach?
plex. Remember that this document minimum stock purchases. What lo- What circumstances would lead to an
provides the framework for your cation and territorial rights have been automatic termination? Are you given
business life over the next seven years granted? Are these exclusive to you? a period in which to remedy your
or so. What property and equipment is re- breach?
Franchisors, particularly estab- quired? What obligations are there on Ask yourself some “What if?” sce-
lished ones, will rarely change or you and the Franchisor relating to the narios. What if you died or were seri-
negotiate the terms of their standard ongoing operation of the franchise? ously ill? What if you failed to meet
Franchise Agreement as they will Often the most complex area re- your sales targets? What if you want-
want to maintain uniformity across lates to renewal and termination of ed to sell product out of your terri-
all the franchises. However, it is es- the franchise. Are you granted an tory? What if a customer sued you for
faulty products? If you cannot answer
all your What ifs, do seek more advice.
Don’t be afraid to ask the Franchi-
sor these questions. But don’t expect
an impartial response. The Franchise
Agreement will usually have an ex-
press term preventing any reliance
upon representations or claims made
by the Franchisor in the initial presen-
tations or documentation. Much to
the disappointment of many clients
who come to us for advice having run
an unsuccessful franchise, this applies
particularly to any claims as to how
much money can be earned... Buyer
beware!
Author Bio
Martin Truman is head of commercial law firm,
Truelegal Solicitors. For more information about
Franchise Agreements visit www.legal-advice-centre.
co.uk/franchise-agreement.html.
Source:
ArticleGeek.com
36 HISPANIC NETWORK MAGAZINE Celebrating 18 Years of Diversity
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