In these uncertain economic times, many people are looking to find ways of increasing income or for alternatives to current careers.
Franchises are seen as attractive options to those who would like to start up their own businesses but who are reluctant to go it alone. They usually offer training resources and marketing, together with the branded backing of a company with experience and reputation in the relevant market.
Franchises are available for a wide range of businesses, from website magazines and domestic cleaning services to restaurants and ‘take-aways’.
The Manual
It is important to be aware that, although the franchisee will be running the business himself, he will usually be required to act in accordance with rules and regulations set out in a Franchise Manual. A copy of any such manual is provided to the franchisee, once the Franchise Agreement has been signed.
The franchisee should ideally try to obtain a copy of the manual prior to signing, however, most franchisors are reluctant to provide such a copy until the franchisee is tied in contractually, as it will contain confidential details as to how the franchise operates.
The Franchise Agreement
This is a written contract been the parties, defining the relationship between the franchisor and the franchisee. It includes details of fees payable under the
agreement, a summary of the parties’ obligations and provisions for termination.
Franchise agreements are usually biased in favour of the franchisor; it is therefore essential that the franchisee fully understands the contents of the agreement, as hidden costs may later generate nasty surprises if, for instance, the franchisee wishes to sell the franchise, the franchisor will often be entitled to a substantial percentage of the price obtained.
The questions most often asked by prospective franchisees are:
- What initial and ongoing costs will there be?
- How and when will it be possible to terminate the Franchise Agreement?
- What help and support will be provided to the franchisee by the franchisor?
Independent legal advice is essential since, as with any contractual relationship, there may be traps for the unwary.
Franchise Agreement checking service
If you are thinking about purchasing a franchise and would like advice on the franchise agreement, please contact our commercial team.
