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What sort of restrictions are imposed in the franchise agreement?
Lots. Franchise agreements are extremely one sided, imposing a huge number of obligations and restrictions on franchisees. But you should not view these negatively because, after all, if you have invested your life savings in a franchise you do not want the brand value to be badly affected by the acts of other franchisees who are not complying with the system. You need to look at the obligations and restrictions in the franchise agreement in a positive light. They are also there to stop you making mistakes, because franchising is about franchisees following a system, which enables the franchisor to ensure that they don’t fail. The restrictions will principally relate to how you operate your business, because from a franchisor’s perspective the franchisor will want customers to receive an identical service from all of his franchisees. The agreement will also contain provisions that would prevent you from being involved in a similar or competing business, so as to make sure that you devote your whole time and attention to making a success of the franchise business. Finally, the agreement will contain tough termination provisions aimed at ensuring that standards are maintained. The purpose of these provisions is to enable a franchisor to get ‘tough’ with its franchisees and put pressure on them to ‘behave’, failing which their franchise can be taken away.
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