15,000 best franchises. Choose your franchise and start your business today.

15,000 best franchises. Choose your franchise and start your business today.

Legal review of the franchise agreement

Picture the scene: you've decided to take the plunge, perhaps give up your job, invest significant capital, and become a franchisee. You like and trust the franchisor and, to date, you have understood every piece of information given to you and are looking forward to undertaking training and starting your new franchise business. You are then landed with a 30-page (and sometimes 60-80+) franchise agreement which appears totally one-sided and which you are told is non-negotiable. You are then told (or at least you should be) that you need to instruct a solicitor.

Most people only come into contact with a solicitor when they are selling their house, divorcing their spouse, making a will or if they need to go to court: not always positive experiences! So how do you choose a solicitor to review the franchise agreement? Well you do not go back to the solicitor who dealt with your house conveyance or your grandmother's estate. Almost all solicitors today are specialists in particular fields of the law - and franchising is no exception.

A solicitor who does not understand franchising will often seek to negotiate and change the franchise agreement (perhaps running out of red ink in the process), will tell you that it is totally unreasonable and that you should not sign it under any circumstances. They will then charge you a fee based on the time taken to undertake this entirely futile exercise.

Most solicitors who specialise in franchising also act for franchisors and draft franchise agreements as part of their day-to-day work; they understand that the main purpose of the franchise agreement is to protect the intellectual property of the franchisor and of the network and that this in turn protects incoming franchisees who become part of that network. The agreement should be uniform for all franchisees, as must the franchise system.

Franchise solicitors will be able to report on the franchise agreement (rather than seek to amend it, unless necessary for legal or ethical reasons), and will be familiar with the Code of Ethics. They will also be able to provide a comprehensive report highlighting your rights and duties, anything that may be unusual or onerous in the contract, anything that may be missing which they would expect to see in an ethical business format franchise agreement, and any areas that you need to clarify with the franchisor. If anything needs to be changed or clarified then this is usually set out in a legally-binding side letter signed at the same time as the agreement, and attached to it.

The experience should not be a negative one and should assist you to make an informed commercial decision as to whether to proceed with the franchise. Your solicitor may also be able to make general comments about the franchise.

While a well-drafted, ethical franchise agreement does not make a good franchisor (there is a lot more to it than that), a franchisor that has not made the effort to take proper legal advice and to have a document prepared that is well thought out and drafted by an experienced franchise solicitor, should be viewed with caution!