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How long is a typical franchise agreement?
The NatWest/British Franchise Association survey analyses franchises on an annual basis. It concludes that the great majority of franchise agreements in the UK last for five years, a small number last for 10 years and an even smaller number last for 25 years. The reason for the lengthy terms of 25 years is that they relate to very high cost franchises such as McDonald’s, Burger King or KFC and the term of the franchise is the same as the term of the lease of the franchised premises.Other than high initial cost franchises, you would expect terms of five to 10 years. Usually five years is used because there are complex competition law issues that allow those franchisors who want to control franchisee’s sources of supply of products and other items to do so only for five years (although the five year period can be renewed). For those franchisors that do not have a concern in this area, or who feel that franchisees need the reassurance of a guaranteed 10 year period, they will offer 10 year franchises.Either way you would expect franchisees to have an automatic right to renew, provided that they had performed to the franchisor’s satisfaction - once for a 10 year franchise and twice for a five year franchise. It is extremely unlikely that a period of less than five years would be a sufficiently long time for the arrangement to be a genuine franchise.
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