Franchising, buying or selling a franchise

Buying a franchise is for many their first step in to the world of running you’re own business. It is an exciting time and one which is often rewarding. 

Franchising is typically a cheaper way of entering a business or sector, provided you’re buying the right franchise. You’re buying their brand, their reputation and their system. Done properly, franchising can be a great way of making serious money. 

But taking out a franchise is also a serious commitment. It often involves upfront investment (whether your own money or financed by bank or franchisor) and usually involves you as franchisee giving a personal guarantee to the franchisor as well. A lot can go wrong. 

If you’re looking at buying a franchise, then you cannot go wrong with doing all the research possible and getting the best advice possible. 

What you should be looking for is: 

• advice on the franchise agreement – you’ll want to know what you’re signing up to, your rights and obligations and also to ensure the franchisor does what they say they will do. 
• Sound commercial advice – are you taking on employees and a commercial property? You’ll need expert advice here
• Company advice – how best to structure your company, particularly if you have investors on board

Your Business Lawyer offers genuine franchise law experts who can help with everything you need from a legal position on franchise law. So get in touch today for a no obligation free chat about your requirements. 

The most important document when taking out a franchise will be the Franchise Agreement. 

Sadly, these are often presented as being “non-negotiable” and whether they are will depend on the strength and size of the franchisor and whether they have a queue of other franchisees wanting to sign up. 

However, it is still vitally important that you have a professional franchise agreement review carried out by a franchising lawyer, so that you know exactly what your rights and obligations are. 

A typical franchise agreement will include terms such as: 

1. Interpretation – these are definitions used throughout the agreement 
2. Rights granted – what rights are you getting (eg right to use trademark, the system and the IP in the territory) 
3. The Territory – where are you allowed to perform those rights 
4. The Trade Marks – the franchisor’s registered and unregistered trademarks and other IP. 
5. Products and Services – what products and services you are permitted to sell
6. Commencement Date and Term – when the franchise starts and for how long 
7. Fees – how fees such as royalties and marketing fees are calculated and paid
8. Franchisor’s initial obligations – what the franchisor is going to do in the initial stages 
9. Franchisor’s continuing obligations – what they will do throughout the agreement (usually limited to providing support and the system) 
10. Franchisee’s obligations – a long list of all the things you have to do
11. Employees – general requirement for you to comply with employment law
12. Training – setting out what your mandatory training obligations will be initially and during the term
13. Compliance with laws and policies – straight forward 
14. Anti-bribery compliance
15. Accounting records – details what records you’ll need to keep
16. Advertising – may include franchisor obligations to advertise, may be limited to what you can and cannot advertise
17. Telephone numbers, email addresses and domain names 
18. Insurance – details of what insurances you’ll be required to take out 
19. Premises – sometimes premises are provided by the franchisor or a related property company, other times you may find your own property  
20. Intellectual property – copyright, trade marks and design rights 
21. Sale of Business – usually if you want to sell the business you need franchisors permission. Sometimes they have first option to buy. 
22. Death or incapacity of individuals – usually includes appointment of a manager and details what happens if you die
23. Termination – all the many reasons a franchisor can terminate the franchise agreement 
24. Consequences of termination – and what happens if they do terminate 
25. Restrictions – stops you from setting up in competition for a period of time 
26. Indemnities – ensure you pay any costs or losses suffered by the franchisor if you breach the agreement 
27. Individual’s guarantee and covenants – where a franchisee gives a personal guarantee to the franchisor 
28. Data protection 
29. Assignment – whether the franchise agreement can be assigned by any party 
30. Expert determination – what happens if there is a dispute 
31. Alternative dispute resolution
32. Payments – how payments are to be made 
33. Limitation of liability – usually that the franchisor’s liability to you is limited 
34. Start-up Packages – what you get for the start up or initial franchise fee 
35. Training – details of what training you’ll need to do
36. Licence terms for Franchise Software – if they provide IT and software, there will be terms on that 
37. Mandatory Policies – things like anti-bribery, anti-slavery etc 
38. Franchisor’s standard supply terms and conditions – for you to use in future sales of goods/services. 

If you are buying or selling an existing franchise, then you’ll need expert legal support to guide you through it. 

A franchise business transfer is not significantly different from a normal business sale or purchase but the franchisor will be involved in the transaction as well. Indeed, for larger franchisors, they will usually draft the share purchase agreement or asset purchase agreement. 

If you’re buying, you’ll want to ensure that you’re getting all you think you’re getting, that there’s no major issues with the business and that the seller doesn’t take away the customers after completion. 

If you’re selling, you’ll want to ensure that the deal is done as quickly as possible with as little future liability on you as possible. This often includes agreeing a release of any personal guarantees, for example. 

As in any business transfer, there is likely to be employment law issues and property law issues, as well as the corporate commercial side of things. It’s therefore important that the lawyer you choose is an expert in franchising law, but also someone who has or has a team that can input in to the other areas. At Your Business Lawyer, our team of consultant solicitors can help. 

At Your Business Lawyer, we like to try where ever possible to agree fixed fees, or capped fees, for each matter. We find that this gives our clients better certainty than an hourly rate. Of course, there may be times where additional work is required or the deal changes, and we will always discuss and agree variations to the original fee. All fees are subject to Nexa Law’s terms of business, which will be provided prior to engagement.

Franchise Agreement Review: from £550 plus VAT up to around £950 plus VAT. 

Franchise Disputes: From £500 plus VAT initial advice to tens of thousands of pounds

Typical hourly rate: £265-375 plus VAT