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Franchisees - What Do We Do?
Franchise Agreement Reviews
We prepare a report on franchise agreements for a fixed fee.
Our experienced franchise lawyers will be able to tell you precisely what clauses are unusual, unfair or unworkable. Armed with a critical report, you may still decide to go ahead with the franchise in precisely the same way that you might go ahead with a house purchase after a negative survey.
Many prospective franchisees discuss issues which have been raised by their franchise lawyers with their proposed franchisor and indeed franchisors even if they are unwilling to alter their franchise agreements may provide a letter of comfort giving prospective franchisees reassurance on the issues that they are unhappy with. At another extreme you may decide that what you thought was a well established franchisor, isn’t quite as good as you have been told because the franchise agreement contains a substantial number of provisions which are unusual or unworkable – it is certainly better to know this before you have committed time, effort and money to the franchise than after!
Issues which are often raised in reports include:-
(1) What sort of exclusive territory is being granted. Could the franchisor compete with its franchisees?
(2) Has the franchisor obtained a registered trade mark and why is it important?
(3) Are the initial and continuing fees too high?
(4) Is the franchisor committed to do the sort of things that franchisors normally commit to do and are these obligations clearly and unambiguously set out?
(5) Can you sell your franchise business? If so, what right does the Franchisor have to prevent a sale and what payments are required to be made?
(6) How easy is it for the franchisor to terminate your franchise agreement?
(7) Can you renew and is this right “automatic” or can it be lost for minor breaches of the franchise agreement which are bound to arise in a long term contract such as a franchise agreement?
(8) Are the minimum performance obligations “standard”.
We will also be able to help you on other issues such as incorporating your company, or forming a partnership, taking a lease of the franchise premises and advising you on the terms of any deposit agreement, which the franchisor asks you to enter into and, in particular, whether you are entitled to the deposit back, should you decide not to proceed with the franchise.
Franchise Disputes
Hopefully your relationship with your franchisor will be harmonious and rewarding but, unfortunately issues do sometimes arise. It is almost always better to try to resolve issues without the need to litigate/mediate or arbitrate but, in exception circumstances, the resolution of a dispute by a third party may be necessary or, of course, you may be at the receiving end of proceedings from your franchisor.
Mediation
We have acted as a mediator appointed by the British Franchise Association as part of its mediation procedure and have acted for one of the parties in a large number of franchise mediations. In all the mediations we have been involved in our franchise clients have confirmed that they have had a successful outcome from the mediation.
We encourage the use of mediation as a cost effective way of resolving franchise disputes – remember in mediation no decision is imposed on you; it is up to the franchisor and the franchisee to resolve their dispute with the help of the mediator. If you are not willing to settle you don’t have to!
Arbitration
Again the British Franchise Association has its own arbitration scheme and we are one of only very few legal experts whom the BFA have appointed as an arbitrator.
Litigation
In some cases litigation is the only way to resolve a dispute. This is particularly the case when urgent action is required – for instance when a franchisor wants to stop a franchisee from setting up a competing business or passing on confidential information. In these situations franchisors may seek an injunction – a court order breach of which could amount to contempt of court. We have defended franchisees who find themselves in this situation.