Franchise UK Legal Agreements

It’s crucial you have a franchise agreement scrutinised by a qualified solicitor before making a financial commitment, Paul Stafford of the British Franchise Association says

You’ve found your perfect franchise, done your due diligence until you can find out no more and pored over the financials to make sure your new opportunity can pay the bills with a lot of hard work. Eventually you’ll arrive at perhaps the most important aspect of becoming a franchisee - signing the franchise agreement.

There are a lot of different facets when it comes to the contract between franchisee and franchisor, with any good agreement being tailored to the particular brand and franchise model.

Legally binding

But there’s one thing you must do above all else - and that’s get it checked by a qualified and accredited franchise solicitor. Not a commercial lawyer, not one that helped you buy your house, nor one that you’ve known for years as a friend, but one that understands the franchise sector inside out and can tell you exactly what you’re signing up for. This is a legally binding contract and it’s going to govern the future of your relationship with your franchisor for some time (most agreements are for a duration of five years, more for some franchises).

Of course, it’s an easy thing to skip over. An agreement review typically costs anywhere from £400 upwards and some people don’t want to bear that cost. But you’re about to sign up to a legal contract, determining, among other things, what support you have the right to expect as a franchisee, what you must do to satisfy the franchisor and how much you must pay in management service fees.

At the British Franchise Association, we receive calls from people who have signed up to something claiming to be the next big thing, not had their agreement checked and now find themselves locked into a business that receives little or no support, but with a legal mandate to continue to pay their ‘franchisor’ fees every month regardless.

A simple check from a qualified mind would have shown that this ‘franchisor’ has promised them no support by law, but that they’re about to legally agree to pay the franchisor a sum of money per month for the next five years.

It simply cannot be overstated how important this part of the franchise recruitment process is. So much so, in fact, that even when looking at franchisors that are bfa members and have therefore agreed to conduct their franchise model according to the European code of ethics on franchising, we still strongly recommend you get your agreement checked.

Why is that, given we look so stringently at a franchise before they can join the bfa? Simple - so that you understand, inside out and back to front, exactly what you are signing up to. Is your territory exclusive? What will your fees be on a monthly basis? Is there a marketing levy? What are your rights when it comes to selling your business? Renewal terms? Are there any terms that are particularly unusual that need careful consideration? These are just a few of the questions covered by that agreement. There are a lot more.

Protecting the brand

None of this is intended to scare - quite the contrary. The franchise agreement protects both franchisor and franchisee, as well as the wider brand and franchise network, for the benefit of all parties concerned.

But if you’re doing the right research elsewhere in the joining up process, don’t fall short on this vital last step - get the agreement checked, sign up with confidence and let your focus and concentration be on your exciting new business. It could be the best few hundred pounds you spend in the entire process.