Franchise Your Business
T
he franchise agreement is the key document, as it governs the relationship between the franchisor and the franchisee. Some topics covered in the
agreement are very much about protection but all must be considered from a commercial standpoint in relation to the brand concept. A consultant therefore acts to explain the purpose of the agreement with options for control and brand protection, and then creates a brief for the lawyer that will enable them to draft the agreement tailored to the client. Important points within the agreement include: • The grant: the franchise agreement will detail the rights offered by the franchisor to the franchisee, which would normally include the right to operate under a particular trade name in accordance with a system, all from either specific premises or within a territory. If the franchisee is able to operate within a territory, then the agreement will stipulate whether that is on an exclusive or non-exclusive basis
• Term and renewal: a franchise agreement will be for a defined term, typically five years or, where the payback is longer, seven or 10 years. At the end of the initial term the franchisee would normally be given the right to renew the agreement, subject to fulfilling certain conditions, including not having been in breach of the agreement, undertaking further training, refurbishing any premises and upgrading any equipment
• Obligations of both parties: the franchise agreement will contain the franchisee’s obligations, which are unsurprisingly more extensive than the franchisor’s. The franchisor’s obligations would normally include provision of training and ongoing support, while the franchisee’s obligations will cover all aspects of the business
• Right to sell: the franchise agreement would make it clear that the franchisee has the right to reap the benefit of years of hard work and to sell the franchise, subject to certain conditions, including the franchisor approving the incoming franchisee and the payment of fees associated with the application and sale to the franchisor
• Early termination: the franchise agreement would set out the circumstances in which either party can terminate the agreement early. In the case of the franchisee, this would normally be limited to a
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