Franchise Agreement

[JenHewlett]

I'm looking at buying a Franchise, however, the Franchise Agreement is very biased towards the Franchisor, making it easy for them to terminate the agreement at any time with a number of subjective statements (i.e. in the Franchisors reasonable opinion you do not meet the high standards etc.)
I have asked the Franchisor to define these subjective statements, or give me a specific criteria to work towards.
She has said she can't amend the contract (as other franchisees work off it), but could any document she provides to me with these definitions etc. be admissible in court in the unlikely event of a dispute..??

 

[vvaannmmaann]

Could you not start a business without using a franchise?
I am in no way a fan of franchises,partly for the reason you mention.Have you read the other parts of the agreement thouroughly? Do you for example have to buy your consumables,stationary,PPE etc from them?
Remember you are only buying their name.They are taking no risk.
If you really are keen,get a lawyer to go through the agreement.

 

[RogerBa]

I'm looking at buying a Franchise, however, the Franchise Agreement is very biased towards the Franchisor

From the handful I have read they all are, one of the reasons I decided not to go down the route of buying a franchise.

Again from my limited personal experience the real truth will come from other franchisees', and not the ones they tell you to go and see or talk to.
Tell the franchisor you'd like a full list of every current franchisee and those who have sold/given up their franchise in the last 12/24 months (accept you may not get the latter but at least ask), and that you will use this list to contact a number of random franchisees and you will come back to her with all the positive and negative comments so she can give her view/side of the story.
Do not expect everything to be perfect, it never will be, but you have to judge if the overall package is right for you.

Finally there are some franchisors who will negotiate on the contract but also some who refuse, probably due to legal advice they have been give.

 

[KM-Tiger]

Could you not start a business without using a franchise?

Echo that.

Franchises can work very well, but there is a big risk that you just empty your wallet into the franchisor's. There are in my opinion two keys tests:

• That the franchise gives you a competitive edge that you cannot obtain any other way
• That what you get is worth at least , and better more, than what you will pay.

 

[JenHewlett]

I'm happy that i'd be buying into a good brand with an excellent product. It's literally the contract which is biased towards the franchisor, and I can understand why, to control any rogue traders that may ruin their reputation. However, should the franchisor WANT to go on a witch hunt and terminate our agreement, I want a more specific definition to their subjective statements.
Therefore, if they provided a document answering my queries with these specific definitions, could that be used in court if there ever was a dispute (as the terms wouldn't be in the signed contract)?

 

[vvaannmmaann]

You have already been told that they will not change their contract just for you.
They have a contract to protect their position.If you don't like the contract then walk away from the franchise.

 

[Psl]

I'm happy that i'd be buying into a good brand with an excellent product. It's literally the contract which is biased towards the franchisor, and I can understand why, to control any rogue traders that may ruin their reputation. However, should the franchisor WANT to go on a witch hunt and terminate our agreement, I want a more specific definition to their subjective statements.
Therefore, if they provided a document answering my queries with these specific definitions, could that be used in court if there ever was a dispute (as the terms wouldn't be in the signed contract)?

To answer your question about documents being used in court, any document can be used by your legal team in court. But the the main point is that if you are thinking of the possibility of court then you shouldn't take the franchise on.

If the franchisor has a clause in the agreement such as the one you stated; 'in the Franchisors reasonable opinion you do not meet the high standards etc'.
Then don't sign the contract as establishing if you meet the franchisors reasonable standards should have been established long before you even got to contract stage.

Other comments have been made about contacting existing franchisees to get a fuller overview of the opportunity. As, an ex-franchisor I can say that there are reason why franchisors direct the potential franchisee's to existing successful franchisee's for a chat, and they are obvious.

There is no sense in having a potential franchisee talk to a failed franchisee.They failed for a reason and if the franchisor has existing successful franchisees then in my view the failed franchisees have only themselves to blame for failing. After all, the successful ones are the ones that have followed the franchise model and operated as per the operations manual and didn't try and re-invent the business.And that's talking from experience.

Anyone looking to buy a franchise should always seek independent professional legal advice in respect of the agreement before signing it. If they don't and go ahead and sign anyway and fail a later stage, they have only themselves to blame.

OP if you feel that it is a good brand and excellent product then go for it. But your concerns that you have about the agreement, before you even start, need to be addressed by professional legal people.

 

[Homer J Simpson]

Walk away.

No, run!

 

[Mike W]

As has been stated you should certainly seek independent legal opinion, no question (unless the fee is a tenner). But then again, no legal brief worth their salt would tell you to sign a contract with that kind of clause in, so you'd be probably just be wasting your money.

If I were you, I'd force some clarification on what is and what isn't reasonable, and if the answer isn't to your satisfaction then either you've got to walk away ...or walk a tightrope for the foreseeable future.

Maybe your idea of reasonable and theirs are miles apart? Maybe your great sales aren't the reasonable thing that they're looking for ...especially if they think they can find something else they think isn't reasonable in order to shunt you out and benefit themselves from the hard work you've put in.

I'd tread carefully. Any business that weighs a contract so heavily in their favour isn't to be trusted. It's hardly a reasonable way to begin, after all.

 

[Chris Ashdown]

Can you say what area of trade the company is in i.e. Gardening, Fast Food, Ice Cream sales etc.

Whatever you want to ask them do it in writing and only accept written answers to your questions, a paper trail is one thing you need in all contracts, salesmen and ladies often lie through their teeth or miss out that all important item as not worth mentioning

The other question is how long they have been operating and how many franchisees they have and how many have dropped out

Even some mega chain ones fail, we had a Burger King fail in Great Yarmouth about 15 years ago

 

[KM-Tiger]

... i.e. in the Franchisors reasonable opinion you do not meet the high standards ...

If it's of help I just checked my own franchise agreement. The phrase "the Franchisors reasonable opinion" is there, but is much more specific.

If You do or omit to do any act which in the Licensor’s reasonable opinion is damaging to the Licensor’s or the Trade Mark’s reputation or has a detrimental effect on any other franchisees or licensees.

At least that relates to the fact of doing or not doing something that must be damaging or detrimental, rather than just the opinion of the Franchisor in relation to "high standards". Are those "high standards" defined?

As other have said, if they won't change that then walk away.

 

[speedysi]

Unless it's a very big brand i wouldn't touch a franchise with a barge pole as all franchise agreements are set up in favour of the franchisor and there is no independent regulation of franchising in the uk as the BFA is paid for by the franchisors. Do your homework and scout around the internet to find numerous examples of people who have lost everything because of investing in a franchise. I would agree with all of the comments mentioned about doing something similar to the franchise but doing it yourself rather than entering into a franchise agreement. Franchisors use expensive lawyers to make sure that they win any argument. The biggest rule of franchising is only to invest money if you can afford to lose and don't forget about the famous clause of lost management fees if you decide to walk away. I would most strongly disagree with the comment that states francisees fail because it's their own fault, i did notice that the comment was posted by an ex-franchisor.