What Is My Status As A Franchisee?

Shelley Nadler writes:

As a franchisee, your status is that of an independent business person entering into a contractual relationship with a franchisor for the right to carry on a business format franchise for a period of time.

The franchisor grants a licence to a franchisee for the right to use the brand name of the franchisor and the franchise system. As a franchisee, you’ll acquire no ownership of rights in the brand name or franchise system, but will be permitted to use these rights during the term of the franchise agreement.

The legal relationship between a franchisor and franchisee is primarily a contractual one based on the franchise agreement the parties enter into as two independent business people. A franchise agreement is subject to the usual principles of contract law.

If you’ve not been in business before, it’s important to remember that as a franchisee you will not receive the kind of legal protection you enjoy as an employee or a consumer. As a franchisee, you are considered an independent business person entering into a commercial agreement with another party.

A franchisee will be able to take legal action against a franchisor under general legal principals as would any other person or entity if, for example, the franchisor is in breach of the franchise agreement or if a misrepresentation was made by the franchisor during the recruitment process.

Where the franchisor sells goods to a franchisee, there will be a buyer/seller relationship and the franchisee will be protected under legislation relating to the sale of goods.

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.