Franchisee focused legal advice

If you are thinking about starting your own business, franchising can be an attractive option. Normally, acquiring a franchise should give you a considerable head-start over setting up a completely new business from scratch. However, as in any business, there can be no guarantees. In particular, when taking a franchise, there are a number of legal considerations for anyone thinking of becoming a franchisee.

Legal Considerations
At some stage you will be asked to sign a “Franchise Agreement”. This is normally a lengthy, comprehensive legal document. It is unlikely to be an easy read! The Franchise Agreement closely regulates the way you will operate your business, tells you what fees you have to pay to the franchisor, lays down restrictions on business activities you can carry on outside the franchise business and specifies what will happen if you die or become seriously ill.

You may also be asked to sign a “Deposit Agreement”, “Confidentiality Agreement”, “Intent to Proceed Agreement” or something similar before you are presented with the Franchise Agreement. These Agreements often specify that you have to pay a sum of money by way of a “deposit” which may or may not be refundable if you decide not to proceed with the franchise.

If you need premises from which to operate the franchise business, you will almost certainly need to sign a Lease.

You will also need to decide whether you are going to run your business as a sole trader, in partnership with another person or through a company or other corporate entity. You may therefore need a Partnership Agreement or to form a company with an appropriate constitution.

All of these issues require careful consideration before you make any decisions or sign any agreements, preferably with the benefit of advice from a specialist franchising solicitor. Most franchising solicitors will offer a Franchise Agreement review service and provide a written report clarifying the provisions of this complex but very important document. They will also be able to assist you with any other agreements you are asked to sign.

Commercial Considerations
Alongside the legal issues, there are some important commercial considerations that any prospective franchisee should consider. For example:

• Is the franchise successful?
• What do existing franchisees think of the business and of the franchisor?
• How much are you going to have to invest?
• Will you need to borrow money to acquire the franchise and commence trading? If so, who should you approach for such funding?
• Is this a franchise business that is going to last?

These are just a few of the issues a prospective franchisee will need to consider and obtain advice on. As well as specialist franchising lawyers, there are accountants, banks and franchising consultants who have particular experience and expertise in relation to franchising and the establishment of franchised businesses. Obtaining advice from such specialists can help you to make the right decisions in relation to what will be a significant personal investment both in terms of time, money and effort.

For further information, contact Owen White:

Tel: +44 (0)1753 876800
Fax: +44 (0)1753 876876
Email: law@owenwhite.com