Updated: Jul 4, 2020
What is a Franchise Agreement?
A Franchise licence or agreement is an authorisation granted by either a company or a Government body to a group or an individual. It is generally used where one party, the franchisor, wishes to grant a licence of its business to another party who is called the franchisee. The franchise licence gives the franchisee the right to operate that business in a particular area (i.e. territory) within the UK or abroad either on an exclusive or non-exclusive basis for a fee. If the franchise is granted on a non-exclusive basis the franchisor will not have the right to appoint any additional franchisees in that area. Most fast-food chains such as McDonalds, Burger King and Kentucky Fried Chicken (KFC) have a mix of company-owned and franchise stores.
The Franchisor’s trademarks and other features used by the franchisee in its territory and by the franchisor's other franchisees in other territories within the UK bestow a distinct common identity on all offices of the franchised business for the franchisor and franchisees benefit.
Franchising has several benefits for the franchisor and the franchisee. The franchisor can grow and develop its business without having to open new offices, employ additional staff, refurbish and operate new premises, branches or outlets itself.
On the other hand, the franchisee is able to operate and run its own business, in the confidence that the business has already been tested by the franchisor and is able to make some reasonable use of the franchisor’s knowledge, skills, business experience, customer service experience, business planning skills and expertise. The Franchise agreement will set out the duties and obligations of the franchisor and franchisee and will generally include a confidential clause stipulating that all commercially sensitive information and trade secrets, is protected from unauthorised disclosure, thereby protecting the franchisor’s interests and clauses such as initial set up, fees and payment, a non-solicitation clause, competition clause, insurance, procurement, training, quality control and termination clauses.
The franchisor will also need to provide the franchisor with an Operations Manual. This is a rule book, which will provide all of the necessary rules and details needed for the successful operation of the business eg the minimum standards and insurance requirements. The franchisor will also offer formal training in company policies and procedures. Under a standard franchise agreement, the franchisee also pays a service fee which may be a certain percentage of monthly sales. A rental fee may also be charged if the franchisee occupies property owned by the franchisor ( this may be a base rent or based on sales).
As a franchisee you need to make a significant upfront investment and show that you can lead from the front and work within the Franchisor’s operational framework. Our business lawyers have substantial experience in advising franchisees and franchisors at the outset of their franchise journey when they are exploring franchising, drafting the franchise agreement, advising you on the implications of the franchise agreement and advising you as go along.
We can also introduce to related specialist professionals who can assist you on your journey including funders, banks, franchise consultants and accountants.
If you are considering setting up a franchise our franchise solicitors can advise you in relation to the various issues that need to be considered at the outset. This will include (for franchisors) drafting the franchise agreement, protecting your intellectual property and providing you with ongoing support.
Once you have set up your franchise network, we can assist you with the appointment of new franchisees, franchise re-sales and renewals and termination of franchise agreements and the enforcement of post termination covenants
Our franchise solicitors can review and advise you on the draft franchise agreement and operating manual and explain the terms of what often lengthy and complex documents are. We can also advise provide you with ongoing support and advice in the course of the franchise agreement through to the sale of your business and exit from the franchise business.
Specialist Franchise Solicitors
How can Pure Business Law help?
If you require advice on how to set up a Franchise or if you would like assistance on drafting a Franchise Agreement or any other documents, please contact us on 01234 938089 or e-mail us at email@example.com. We are specialist Franchise Solicitors based in Bedford and operate nationally.
If you are a Franchisor you have come to the right place. If you are a franchisee you have also come to the right place. We have worked with a number of Franchisors and Franchisees supporting them on their franchise journey.