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How does the franchise agreement protect franchisees?
Shelley Nadler writes:
The franchise agreement should cover a number of areas that will protect a franchisee.
It should set out the term of the franchise, which tells a franchisee how long a period they have been given to operate the business. There may be rights to renew the franchise agreement at the end of the term, subject to certain conditions, which should be set out in the agreement.
There should be a grant clause that will set out the rights granted by the franchisor. In particular, it should state if an exclusive or a non-exclusive territory is granted.
The franchise agreement will give the franchisee the right to use the brand name, the franchise system and other intellectual property rights of the franchisor for the term of the agreement.
It should also give the franchisee a right to sell its business subject to certain conditions.
In addition, the agreement will detail the franchisor’s obligations to the franchisee, including training and assistance with setting up the business, the supply of a franchise manual, plus provision of ongoing advice, training and support.
If the franchisor does not comply with its obligations under the franchise agreement or does not honour the rights granted to the franchisee, the franchisee can take legal action against the franchisor.
Shelley Nadler is a legal director in Bird & Bird’s international franchising team and has many years’ experience of advising on all aspects of franchising.
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Gross profits exceeding 70%
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