Omissions from the Franchise Agreement
Thursday 30th August 2018
You've decided which franchise opportunity suits you best, progressed successfully through the franchisor's recruitment process and have now been handed a copy of the franchise agreement you need to sign in order to secure that opportunity. You've read through the agreement and identified which of the provisions raise questions but do you know which omissions should cause you concern? Here are some of the most common omissions that should be noted on your checklist of points to raise with the franchisor:
- No details of registered trade marks for the brand. You need to be sure that the brand you're buying into is protected, as your trade and goodwill rely on the identity being protected from competitors.
- No right to renew the agreement. You should be allowed to renew the agreement at least once. If not, consider if the initial fee is justified for potentially only a five year trading opportunity.
- No right to source comparable products from a third party where you can obtain them at a lower price. If you aren't required to use brand name or specialist products in your franchise, the franchisor shouldn't stop you buying elsewhere if you can find products cheaper.
- No right to your own website or web presence. The franchisor will want to control the look of any website to maintain brand identity but you should be allowed your own website.
- No right to sell the business before the end of the term. This is usually the only way out of a franchise before the end of your term, therefore, if no provisions are included in your agreement you should be wary.
- No obligations on the franchisor to buy-back stock / equipment at a reasonable price on termination. Your assets shouldn't be taken back at no cost by the franchisor.
- No right to a period of time to rectify defaults. If you fail to pay on time or don't submit information by the required date, you should be given time to rectify this before the franchisor can terminate your agreement.
- No right to talk to the BFA if things are going wrong (where the franchisor is a BFA member). You shouldn't be subject to any form of gagging order.
Sheilah Mackie is head of the franchising team at Blake Lapthorn solicitors and can be contacted on 02380 857039 or firstname.lastname@example.org