Legal aspects of franchising
The UK does not have any specific franchise legislation. Normal commercial law applies and the relationship between franchisor and franchisee is regulated through the franchise agreement.
Franchise agreements are standard agreements, primarily because it would be difficult for the franchisor to manage the network if every franchisee has a different agreement. The agreement should be written in straightforward language and needs to reflect the rights and obligations of both parties. Franchise agreements are generally valid for periods between 5 and 20 years. On expiry of the initial agreement, franchisees will usually have the option to renew the agreement for a further period but this may be subject to certain conditions.
As a rule, franchisees own the business and are entitled to keep the profits it generates. The franchisor receives an initial lump sum payment and ongoing fees. The franchisor also owns the brand and all other intellectual property, for example the operating procedures. The franchise agreement will set out in detail what needs to happen when the arrangement ends.
