Money Making

The franchise agreement should
clearly set out details of the parties,
grant of the licence to operate the
business in a particular territory under
the franchisor’s system and brand,
along with the other key terms and
features.
The franchisee’s obligations
clause will be substantial and
typically includes initial and ongoing
training, staffing, financing and
accounts, payment of fees, minimum
performance, use of bespoke or
approved software, marketing,
servicing national account customers
(if appropriate), attendance to
business, use of and compliance with
the business system and insurance.
In addition, usually there will be
provisions regarding the franchisee’s
right to sell the business, death and
incapacity and the franchisor’s
right to terminate in the event of
certain behaviour on the part of the
franchisee.
TRADEMARK LICENCE
One of the most important aspects of
franchising is the franchisor’s name
and brand. Often, franchisors will
protect their brand - logo or trading
name - via a registered trademark
and it’s an important part of the due
diligence process to check this.
There may be a separate licence to
deal with intellectual property or it
may be dealt with in the body of the
franchise agreement.
OPERATIONS MANUAL
Every franchise should have a manual,
which details the operational aspects
of running the business. Franchisees
are typically provided with a copy of - or
access to - the manual after completion
of their training and once the franchise
agreement has been signed.
Manuals may be hard copy or
electronic and sometimes accessible
via a franchisor’s computer system,
intranet or web portal. Franchisors
may allow prospective franchisees to
view the manual under appropriate
conditions of confidentiality before
signing the franchise agreement, but
would not normally allow long-term
access or copies to be made.
AND THE REST…
There may also be standard form
documents used throughout
the franchisee network, such as
employment contracts, order and
booking forms and standard terms and
conditions.
If franchisees are required to take
on a premises from which to conduct
their franchise business, there will
FRANCHISEES SHOULD
BE CLEAR ABOUT THE
TERMS ON WHICH
THEY ARE TAKING UP
THE FRANCHISE”
likely be a lease and related property
documentation to consider as well. In
some franchises, there may also be a
vehicle lease/hire agreement.
Prospective franchisees should
carefully review the franchise
opportunity and make relevant
enquiries of the franchisor and other
franchisees in the network. The due
diligence process is very important for
prospective franchisees, so that they
have a clear understanding of what
they are getting into, bearing in mind it
could well be a five or 10-year (or more)
investment.
It’s strongly recommended that
prospective franchisees take advice on
the franchise agreement from solicitors
experienced in franchising. Franchising
is a niche area of commercial law and
not many solicitors deal with franchise
agreements, so it’s often more costly to
take advice from someone unfamiliar
with the industry.
Often, franchise specialists will
offer a fixed fee review of a franchise
agreement and, if required, provide
advice on ancillary documentation,
premises acquisition, company
set up and employment advice to
dovetail with advice on the franchise
agreement.
Aside from the legal aspects,
prospective franchisees should
consider the franchise offering
as a whole. The British Franchise
Association website provides useful
resources, including a list of questions
to consider asking a franchisor to
ensure you get as much information as
possible.
Most importantly, prospective
franchisees should be clear about the
terms on which they are taking up the
franchise and go into the relationship
with their eyes open.
MAKING MONEY 41