Franchising is a business model that is increasingly been used by many people who wants to do business with an established brand. However buying a new franchise can be dauting at times.
At Eden King Lawyers, our specialists solicitors are here to the resolve any mysteries you might have with franchising. We offer a comprehensive franchise service, drawing upon our experience acting on behalf of both franchisors and franchisees. Our specialist lawyers have assisted many clients with the purchase of new and existing franchise businesses.
Advantages and disadvantages of franchising
- An immediate tap onto an established bran, reputation, product or service.
- Assistance with buying equipment.
- Assistance with lease negotiations, site development and shop fit out.
- Advertising and marketing support.
- Established standard procedures, operating manuals and stock control systems.
- Assistance with finance.
- Management training and ongoing support.
- Franchisee is restricted to an area of operation.
- Ongoing fees paid to the franchisor.
- Less autonomy.
- Restraint of trade provisions.
- The Franchisee is only allowed to operate for a certain period.
- The Franchise agreement might be terminated when a default event occurs.
So it’s absolutely essential, that you get the right legal advice from Eden King Lawyers when making the right decision to enter into a franchise.
A typical Franchise Agreement will cover the following terms:
- grant of licence
- term and renewal options
- territory of the franchised business
- fees and expenses
- conduct of the business
- equipment and supplies
- training and employees
- warranties, indemnities and guarantees
- intellectual property rights
- non-compete restrictions
- assignment and transfer
- dispute resolution
Franchisors are also required to provide a disclosure document to the Franchisee at least 14 days prior to the Franchisee signing the Franchise Agreement.
Spend time on fully understanding your Franchise Agreement
Whether you are a franchisee or franchisor, the Agreement is essential to the structure of your franchise. Eden King Lawyers will help you to check the Agreement very carefully – and make sure you understand exactly what you are entering into, and that you fully understand your rights and responsibilities under the agreement.
In particular you should pay attention to the following key aspects of any well drafted agreement:
- There are normally significant fees which have to be paid to the franchisor on a continual basis – often calculated as a percentage of sales revenue as payment for the franchisee adopting the franchisor’s business model
- The operations of the franchised business should be clearly outlined in the agreement so the franchisee is usually very limited in the direction they can take the business. Restrictions are usually imposed on the geographical location of the business, restrictions on advertising and the use of franchise trademarks
- The franchisor may be the one who provides most or all of the stock to the franchisee
- Terms and conditions in the agreement may place restrictions on the ability of the franchisee to sell the business – especially before the contract term has expired.
Our services include:
Advice to franchisors:
- Auditing franchise recruitment material – to reduce the risk of misleading conduct
- Franchise disputes
- Compliance issues and obtaining payment
- IP and brand protection
- Territorial rights and internet selling
- Advising on renewal
- Sale of franchises and associated documentation
- Termination of franchises
- Injunctions to seek compliance of restrictive covenants
- Compliance with the Franchising Code of Conduct and the Competition and Consumer Act.
- Drafting and advising on franchise agreements and related contractual documentation
Advice to franchisees:
- Due diligence and the role of the Franchising Agreements
- Pre-contractual recruitment material and financials
- What does the contract mean
- Disputes, payment and franchisor’s obligations
- Termination, negotiating and drafting termination documentation
- What happens after termination – am I personally liable?
If you require assistance with setting up a franchise, or purchasing a franchise, or franchise litigation dispute please contact Eden King Lawyers for a 30 minutes free consultation session.