Franchise Agreement Solicitors
Franchise agreements are the backbone of any franchise business.
For franchisors, these agreements ensure brand consistency and help maintain the integrity of their business model. On the other hand, franchisees benefit from a ready-made business concept and the support of an established brand.
At Lawhive, our network of experienced solicitors specialise in franchise law. They can:
Review a franchise agreement and create a written report outlining principal terms and highlighting any unusual or onerous provisions
Provide advice around franchise agreements
Draft a franchise agreement
Contact our Legal Assessment team for a free quote and discover how our network of specialist solicitors can assist you with your franchise agreement needs.
What is a franchise agreement?
A franchise agreement is a contract between a franchisor (the company that owns the brand) and a franchisee (the individual or company buying into the brand).
Franchise agreements spell out who does what, how money flows, and how long the partnership lasts.
For both parties, understanding these agreements is key. They keep things running smoothly, ensuring everyone's on the same page and reducing the chances of disagreements or legal headaches down the line.
How do franchise agreements work?
Franchisors keep ownership and control of their brand while receiving payments from franchisees. This setup lets them expand without shouldering all the costs and risks, like finding locations and stocking inventory.
In the UK, there's no specific law for franchise agreements. That means negotiating and understanding the agreement is important for protecting both parties and avoiding disputes.
Every franchise agreement is unique and must be personalised to the specific needs of the franchisor and franchisee. But, there are some common elements that most solid franchise agreements include – we'll dive into those later.
Different types of franchise agreements
There are four types of franchise agreements to consider when businesses plan to enter into a franchise agreement:
Single-unit franchise agreement
A single-unit franchise agreement is a contract that gives a franchisee the right to operate one unit or location of a franchisor’s business. Like other franchise agreements, it lays out the terms, conditions, and responsibilities of both parties. It also covers fees and guidelines for running the franchise unit.
Multi-unit franchise agreement
A multi-unit franchise agreement allows a franchisee to operate multiple franchise locations or units. This agreement specifies the terms and conditions for managing these multiple units, including the schedule for completing building works and details of financial commitments.
Area development franchise agreement
In an area development franchise agreement, a franchisee can establish multiple franchises within a designated geographic area. This agreement outlines development schedules, performance key performance indicators (KPIs), and territorial exclusivity clauses, empowering the franchisee to expand and enhance their business within the specified region.
Master franchise agreement
This franchise agreement allows a franchisee to operate as a franchisor within a defined area. The master franchisor assists the franchisee in recruiting and expanding, often covering some setup costs while also receiving a portion of the royalties earned by the franchise.
What should a franchise agreement include?
The contents of a franchise agreement vary based on the type of agreement. Usually, franchisors use standard agreements to keep their business model consistent, but there may be room for negotiation.
Typically, franchise agreements cover financial aspects like:
Franchise fees
Royalties
Marketing
Product costs.
Additionally, agreements for multi-unit franchises, area development, and master franchises include details about territorial rights, and permitting franchisees to operate within specific geographic areas.
How long do franchise agreements last?
Usually, franchise agreements have an initial fixed term ranging from 5 to 20 years, influenced by factors like the type of franchise, industry, and business model.
When the agreement ends, the franchisee may have the option to renew, subject to specific conditions. Renewal terms vary, and some agreements allow for multiple renewals, often involving a renewal fee.
Franchise agreements typically require valid reasons for termination, although some may include a 'force majeure' clause, allowing termination due to unforeseen circumstances.