Does a franchisee buy a franchise for a limited time period only?

The short answer is “yes”.  Whilst it is, in theory, possible for a franchise to be granted in perpetuity that would make no sense for either a franchisor who may be stuck with a franchisee who was underperforming or a franchisee who may, after a period of time, want to retire.

In the UK the great majority of franchise agreements are granted for five years.  Some are granted for ten years and very expensive (in terms of initial investment) franchises such as a McDonald’s or Burger King are granted for the duration of the lease of the premises which is normally 25 years.

The reason that a five year term is popular is that there are provisions of UK/EU competition law that enable restrictions to be imposed for five years, but not longer and, therefore, franchisors tend to choose a five year period provided, of course, that a five year term is long enough to enable a franchisee to recover its investment.

Usually when a five year term is granted the agreement envisages two automatic renewals provided that the franchisee has performed properly under the franchise agreement, so in effect it would last for 15 years and, of course, at the end of that period there would be nothing to stop the franchisor from renewing.  If a 10 year term is granted you would normally expect one renewal term.