Past franchise legal questions
Qu: As a franchisee do I have any protection under the law should my franchise contract prove to be too restrictive or unfairly biased towards the franchisor? Will signing the contract make me legally bound to any and all aspects of the contract should they prove to be damaging to my business?
Answer: Most standard form franchise agreements are heavily biased towards the franchisor. It is important that anyone proposing to sign one should take independent legal advice on the agreement before they do so. If you sign a franchise agreement you are agreeing to be bound by its terms and the starting point for any dispute will be the terms of the contract.
Once you have agreed to the terms of a franchise agreement, it will be very difficult at a later date to dispute its provisions or their reasonableness.
Qu: I'm looking at buying a franchise and one aspect of the agreement I would like some information on is the term. The franchise has a 5 year term with provision for renewal for another five years. I wanted to find out how normal this is as it gives me various concerns including:
1) The renewal has to be on their then current franchise which could have new - less favourable terms
2) They could use this as a way forcing a change in their business model - even moving away from franchising
3) It must make it more difficult to sell on the franchise?
Answer: 1. In my experience it is usual for a franchisor to impose a renewal condition that you must agree to the terms of their latest form of franchise agreement.
2. You are correct. In addition, the franchisor will usually be able to change the system by altering the operations manual. However, depending upon the terms of the franchise agreement, it would probably be difficult for the franchisor to make fundamental changes to the franchise offering.
3. Franchises are often more difficult to sell than, for instance, a stand alone trading business because of the constraints of the franchise agreement.
The above is general guidance only and should not be relied upon in the absence of proper legal advice on the franchise agreement as a whole.
