Typically this agreement could run to 40 or 50 pages andcan be a daunting read to those unfamiliar withcommercial contracts. The very nature of a franchisebusiness structure means that the agreement will befairly complex. Remember that this document providesthe framework for your business life over the next sevenyears or so.

Franchisors, particularly established ones, will rarelychange or negotiate the terms of their standardFranchise Agreement as they will want to maintainuniformity across all the franchises. However, it isessential that you understand what you are being askedto sign. Once you have signed an agreement as abusiness person (without the cotton wool treatmentgiven to consumers) you will struggle to persuade a courtlater that the terms were unfair or sufficientlyunreasonable to be void. You will be stuck with it! Istrongly recommend that you seek legal advice from acommercial solicitor familiar with franchising.

Key areas include establishing the true cost of thefranchise including ongoing royalties, advertising costs,minimum stock purchases. What location and territorialrights have been granted? Are these exclusive to you?What property and equipment is required? Whatobligations are there on you and the Franchisor relatingto the ongoing operation of the franchise?
Often the most complex area relates to renewal andtermination of the franchise. Are you granted anautomatic renewal right beyond the franchise term of 5 or7 years? What renewal fee is payable? Can you sell thefranchise on? Usually you will need to give the franchisorfirst option and/or a right of veto over the acceptability ofany proposed transferee, often coupled with a % fee.What are the consequences of an early termination byyou if you want or need to get out prematurely? Therewill usually be a minimum period with forfeiture of thefranchise fee, stock and possibly other financial penaltiesand compensation. What if you are in breach? Whatcircumstances would lead to an automatic termination?Are you given a period in which to remedy your breach?

Ask yourself some “What if?” scenarios. What if you diedor were seriously ill? What if you failed to meet your salestargets? What if you wanted to sell product out of yourterritory? What if a customer sued you for faultyproducts? If you cannot answer all your What ifs, do seekmore advice. Don’t be afraid to ask the Franchisor thesequestions. But don’t expect an impartial response. TheFranchise Agreement will usually have an express termpreventing any reliance upon representations or claimsmade by the Franchisor in the initial presentations ordocumentation. Much to the disappointment of manyclients who come to us for advice having run anunsuccessful franchise, this applies particularly to anyclaims as to how much money can be earnt?? Buyerbeware!