Getting franchise legal advice

Franchising can be complicated and the franchise agreement can be lengthy, so you are recommended to seek specialist franchise legal advice.

The franchise agreement is a contractual document between the franchisor and franchisee covering the terms and obligations agreed. It is unlikely to be negotiable – it is controlled tightly to protect the franchise business and reputation.

Most franchise agreements are drafted by the franchisor to protect its interests, so a specialist solicitor will be able to advise on what the principal risks to you are and what you need to be aware of before deciding whether to proceed.

There are 5 legal stages when buying a franchise:

• If confidential information is provided by the franchisor, you may need to sign a confidentiality agreement or a Non Disclosure Agreement
• Enter into a deposit agreement, which will be non refundable
• Obtain a copy of the franchise agreement
• Obtain legal advice about the agreement
• Sign the agreement and pay as required

Before signing the agreement:

• Review your contract against your business plan and your expectations of what support you will get
• Make sure you fully understand what has been promised to you as part of the contract. If in doubt, don’t be afraid to ask

Watch out for!

• If the franchise is geographically based, check how close other Franchises are allowed to be set up. If it is premise based, check if it is limited to the number of other franchisees also trading
• If the franchisor's status or reputation diminishes, are you tied in to the agreement?
• If the franchisor is being sued, will they cover your costs if you are drawn into the litigation?
• If you wish to sell, are there any restrictions who you can sell your business to?
• If you wish to take on employees, do make yourself aware of employment laws
• Are there any restrictions on what other business activities you can perform?

For further legal advice on franchise agreements, contact the larger legal firms who have franchise specialists, such as Irwin Mitchell LLP.