A franchise agreement is a contract – you need to be aware of your responsibilities.

It is critical for franchisees to understand the essence and responsibilities of and in the Franchise.

Yes, it is a contract BUT more importantly the franchise agreement lays the ground rules – the very foundation – for the future relationship between franchisor and franchisee.

Marriage

I’ve often said that a successful franchise is a marriage with the franchisor and the franchisee bringing different skills to the relationship but working as one with a common objective of business success.

Trust, respect and a shared vision all help to create a common bond between franchisor and franchisee.

However, to ensure such mutuality you need to base it – from the beginning – on the clear knowledge and understanding of each party’s specific responsibilities.

Responsibilities

The franchise agreement details said responsibilities clearly for both parties.

It sets out in detail the contractual terms, conditions and obligations of both the franchisor and the franchisee. It sets down the rules of the game and the franchise agreement is also the basis of the formal relationship between the two parties.

Objectives

A franchise agreement has three fundamental objectives:

to set out the terms and conditions of the arrangement between franchisor and franchisee.
to protect the franchisor’s intellectual-property rights
to specify the ground rules for operating the franchise units.

As with any contract both sides need to follow the rules and if they do so then it will be a happy and successful marriage. Consider it a pre-nup!

Problems only arise when either side breaks the rules.

Time

The franchise agreement is often quite lengthy and will cover a whole plethora of conditions surrounding the running of the franchise, but, as with most contracts, in a good franchise system people seldom refer to the franchise agreement until the contract period is coming to an end.

As a franchisee, you need to ensure that you have enough time to both reap adequate reward for your efforts and to sell on a valuable capital asset.

Often current franchise agreements will provide an option to renew – and certainly with The Bardon Group companies we provide this option for no additional fee – thus giving you the option to either sell on OR to extend your relationship.

We have 10-year agreements with an option to continually renew.

Other franchisors will have a different time length.

Mutuality

Franchises work because everybody rows the boat in the same direction and every franchisee has the same opportunities, rights and obligations.

To this end every franchisee should sign exactly the same franchise agreement and you should be cautious of the franchisor who is willing to change theirs simply to suit the needs of prospective franchisees. If you and your solicitor – who must be experienced in franchising matters – cannot accept the franchisor’s standard agreement, then you should look elsewhere.

Anchor

Ultimately the magic of franchising is that it combines the knowledge, drive, ambition and individual skills of franchisees with a proven business system, ongoing corporate support and professional guidance of the franchisor to hopefully create a successful business venture for both parties.

The purpose of the franchise agreement is to act as an ANCHOR to that relationship by detailing the elements required to make the magic work.

Of course, the franchise agreement can lay down the rules, provide the parameters and document the means of working together.

However, it cannot detail the most important attributes of a successful relationship.

Attitude, honesty and integrity.