More than 1 in 2 potential franchisees sign up to the
standard franchise agreement of the brand they decide to go into business with
without taking legal advice.
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| Article by David Hughes |
The most common question of those that do take advice is to
know what the pitfalls of the agreement are.
The top 3 pitfalls of franchise agreements, (which are a
surprise for those who don’t take legal advice!), are:
1. It’s your full
time job. Most franchise agreements contain a clause stating that you will
have to devote your ‘full time and attention’ to the franchise and are not
allowed to be involved in any other business while you are part of the
franchise. This means that you will be in breach of the agreement if you are
continuing to work part-time in another business (even a non-competing one)
while you build up your franchise business.
2. You can’t choose
your suppliers. A franchise agreement will state that you have to get your
supplies from the franchisor at their list prices – so even if you can find the
same equipment or products at a cheaper price elsewhere you do not have the
discretion to buy from them.
3. No right to walk
away. Almost all reputed franchises are for a fixed 5 year term with the
option to renew at the end. This means you are tied in for 5 years! Usually the
only way out is to sell the franchise. If you stop trading and walk away early,
then you will likely be liable to the franchisor for lost royalty fees for the
unexpired part of your franchise term.
Garden House Solicitors offers a franchise agreement review.
Taking advice on the contents of a franchise agreement starts from £450 + VAT.
It is a relatively quick process and can give you the peace of mind that you
are not signing up to years of headaches later on.
If you are considering entering into a franchise agreement or you are already involved in a franchise and need assistance you can telephone me on 01992 422128 or email David@gardenhousesolicitors.co.uk
If you are considering entering into a franchise agreement or you are already involved in a franchise and need assistance you can telephone me on 01992 422128 or email David@gardenhousesolicitors.co.uk
www.gardenhousesolicitors.co.uk
Tel: 01992 422 128
Email: info@gardenhousesolicitors.co.uk
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
Today, many people are looking forward to the idea of becoming franchisees, but what is essential is to become a successful franchise and this can be done only if you are prepared in advance and knows your goals. It is necessary that before signing any agreement you should read all the documents properly. A franchise agreement is there whether you are buying a franchise in any industry and it is one of the most important legal documents that are required when you buy a franchise. It is necessary that you and your franchisor should have good relations and thus it is necessary that you should get your agreement checked by a professional lawyer so, that there won’t be any hidden policies or pitfalls in the agreement.
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