What is a Franchise Agreement ?

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Philip Astles, Managing Partner of Kidd Rapinet solicitors in Slough, specialises in all aspects of Commercial Law. Here he explains a commonly asked
question “What is a Franchise
Agreement?”

A Franchise Agreement is essentially where the Franchisor who owns a brand, gives someone else the rights to run a business
using their brand. This makes them the
Franchisee.

There are various rules contained in a
Franchise Agreement stating how the brand is to be used in the business and how long the agreement will last. The agreement will probably also state that the area that you have agreed upon will not have other
Franchises using that brand in the same area.

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What is a Franchise Agreement ?

  1. 1. Philip Astles, Managing Partner of KiddRapinet solicitors in Slough, specialisesin all aspects of Commercial Law. Herehe explains a commonly askedquestion “What is a FranchiseAgreement?”A Franchise Agreement is essentially wherethe Franchisor who owns a brand, givessomeone else the rights to run a businessusing their brand. This makes them theFranchisee.There are various rules contained in aFranchise Agreement stating how the brand isto be used in the business and how long theagreement will last. The agreement willprobably also state that the area that youhave agreed upon will not have otherFranchises using that brand in the same area.Philip AstlesWhat is a Franchise Agreement ?Slough office contact details: Kidd RapinetParliament House, St Laurence Way, Slough, Berkshire, SL1 2BWFrom within the UK: 01753 439089From Overseas: +44 (0) 1753 439089FAX: 01753 820501DX: 42269 Slough WestMain Kidd Rapinet WebsiteListen To The FULL Live Interview
  2. 2. When you look into a Franchise Agreement it is essential that youask for a copy of their standard Franchise Agreement form. Thiswill give you the opportunity to get an experienced solicitor in thisfield to look at the contract before committing yourself and partingwith any money, as any money you put in will not be reimbursed.Although the Franchisor will state that a Franchise Agreement willbe prepared for you, note that you will be charged for this. Yoursolicitor can assist you in what should or needs to be changed inthe agreement to protect your rights.You need to keep in mind that the Franchisor will not accept manychanges, typically up to 5. They may decide not to have you as aFranchisee if you request to make too many changes.So it is important that you and your solicitor prioritise the changesthat you feel are most essential and that gives you the mostprotection.What also must be taken into consideration is that if you wanted tohire a Manager to run the business, they would have to beapproved and trained by the Franchisor.However if they don’t like your choice of Manager they will not letyou employ them.Philip AstlesSlough office contact details: KiddRapinetParliament House, St Laurence Way,Slough, Berkshire, SL1 2BWFrom within the UK: 01753 439089From Overseas: +44 (0) 1753 439089Main Kidd Rapinet WebsiteWhat is a Franchise Agreement?Visit My Blogwww.kiddrapinet-slough.co.uk
  3. 3. Even if you have been successful in making reasonable profit andcomplying with all the rules and regulations within the Agreement,it doesn’t give you any right for an automatic renewal when yourAgreement ends.You can have a provision in put in place stating that the Franchisorcan’t unreasonably refuse a renewal if you have complied with allthe terms and turned over a reasonable profit expected for thatarea.This provision will prevent you from being in a situation where youhave built up a valuable Franchise and then the Franchisor refusesto renew the agreement to then sell it to someone else for apremium amount as a result of your success in building goodcustomer base.It would be seen as fair if the Franchisor decided not to renew yourAgreement if you have not been turning over reasonable profitsand haven’t complied with all the terms set out in the Agreement.Ultimately the Franchisor needs andmust protect their brand!Philip AstlesSlough office contact details: KiddRapinetParliament House, St Laurence Way,Slough, Berkshire, SL1 2BWFrom within the UK: 01753 439089From Overseas: +44 (0) 1753 439089Main Kidd Rapinet WebsiteWhat is a Franchise Agreement?Visit My Blogwww.kiddrapinet-slough.co.uk
  4. 4. There is also likely to be a 3-6 month trial time set in theAgreement. This is to allow either party to exit the FranchiseAgreement if they’re not happy by giving an agreed amount ofnotice.Essentially you need to be satisfied with the Franchise; you needto establish a sound working relationship with the Franchisor.If not then you need to think about whether this deal is the rightdeal for you.It is highly recommended that you should always seek advice froma solicitor before committing yourself to any Agreement or partingwith money.This will ultimately increase your ability to make the relevantchanges needed and also give you the opportunity to walk awaybefore committing yourself financially.If you would like to discuss how to legally set up a Franchise or arethinking of buying into one, please call me, Phil Astles, at KiddRapinet solicitors on 01753 532 541 or arrange a call backarrange a call backPhilip AstlesSlough office contact details: Kidd RapinetParliament House, St Laurence Way, Slough, Berkshire, SL1 2BWFrom within the UK: 01753 439089From Overseas: +44 (0) 1753 439089FAX: 01753 820501DX: 42269 Slough WestMain Kidd Rapinet WebsiteWhat is a Franchise Agreement?

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