Franchise Advice
“A review of the franchise agreement by a franchise specialist may prove to be the most important investment you make”
A
s a prospective franchisee you are likely to be advised to consult a specialist franchise lawyer. You may ask why this is necessary, particularly if
you have also been told that the franchise agreement is non-negotiable. What can you possibly gain from having the franchise agreement reviewed? While not all franchisors are members of the British Franchise Association, it is preferable that the franchise agreement refl ects the provisions of the bfa Code of Ethics, which exists to promote and safeguard standards of good practice in franchising in the UK. Such agreements also contain franchise-specifi c provisions. Even an experienced commercial solicitor, unless they are very familiar with franchising, will not be best-placed to assess what is considered reasonable, ethical and acceptable in the context of the franchisor- franchisee relationship. Another benefi t of instructing a lawyer with knowledge of the franchise market is that they will be able to give you an opinion on how the franchisor is viewed in the industry, including how the banks will assess the opportunity when considering lending. A franchise specialist may have personal experience of problems and legal disputes that have occurred with particular franchises as well as being familiar with franchising case-law generally. A review of the franchise agreement by a franchise specialist may prove to be the most important investment you make in
deciding whether to take up a particular franchise, or indeed, to enter the franchise market at all. The agreement is likely to contain vocabulary and legal terms you may not understand. It is important to have a clear understanding of the rights and obligations you will be bound by if you sign the franchise agreement and to understand what you are entitled to expect from the franchisor in return for your investment. The agreement will contain restrictions on the type of business activities you can be involved with, both during the franchise agreement and for a period after it ends. Taking legal advice from a lawyer who is familiar with franchise agreements will allow you to assess whether, in return for allowing you to benefi t from their business system and brand, the franchisor is imposing reasonable restrictions or acting unfairly. In addition to asking for a general
review of the agreement, it is always worth considering whether you have any specifi c questions about the agreement, or the franchise, and raising these with your lawyer. It would be unwise to assume that what you hope (or were told) would be provided is always refl ected in the agreement. The British Franchise Association has a list of affi liated solicitors with franchising experience. Many affi liate solicitors off er a fi xed-price franchise agreement review service. Asking a bfa affi liate solicitor to review the agreement is a wise decision and will give you the opportunity to check that your understanding of what will be involved in acquiring a franchise is refl ected in the
legal agreement. If a dispute arises once the agreement has been signed, verbal promises by the franchisor will be diffi cult to prove and in some cases, will not have any legal eff ect. Ensure that you are fully aware of the legal implications and obligations imposed by the franchise agreement, in order to avoid being very disappointed or, worse, substantially out of pocket.
In the know
Depending on who you consult, a franchise specialist legal team can advise on, explain and assist with a number of franchise-related issues including: • Franchise agreements • Commercial premises • Defi ning territory • Trademarks and intellectual property
• Franchise resales – buying or selling
• International franchising – taking a brand overseas or bringing to the UK • Master licences • Disputes
Jane Masih
is a director at Owen White solicitors, franchise specialist legal advisors
September 2018 |
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