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What is the Franchise Agreement?

What is the Franchise Agreement?

Categorised in: Ask Nigel    Posted: January 15, 2016

A successful franchise system depends on the franchisor and the franchisee working together as one, with a common objective of business success.

The only way to establish such ‘mutuality’ is to base it – from the beginning – on the clear knowledge and understanding of each party’s specific responsibilities. This is the Franchise Agreement.

The Franchise Agreement spells out in detail the contractual terms, conditions and obligations of both the franchisor and the franchisee.

A Franchise Agreement sets down the rules of the game plus it is also the basis of the formal relationship between the two parties.

Both sides need to follow the rules and if they do so then it will be a happy and successful relationship. Problems only arise when people break the rules.

In essence a Franchise Agreement has three fundamental objectives

  1. It needs to accurately set out the terms and conditions of the arrangement between franchisor and franchisee.
  2. It must protect the franchisor’s intellectual property rights.
  3. It should specify the ground rules for operating the franchise units.

Every franchisee should sign exactly the same agreement and you should be cautious of the franchisor who is willing to change their Franchise Agreement simply to suit the needs of prospective franchisees.

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

If you, as a prospective franchisee, and your solicitor (who must be experienced in franchising matters) cannot accept the franchisor’s standard agreement – then you should look elsewhere.

The Franchise Agreement is often quite lengthy and will cover a whole plethora of conditions of running the franchise – including the length of the contract period.

As a franchisee you need to ensure that you have both enough time to reap adequate reward for your efforts AND enable you 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 an option with no additional franchise fee payable.

I’ve often said that franchising is a marriage.

Moreover, the magic of franchising is that it combines local knowledge, drive, ambition and individual skills with a proven business system, on-going corporate support and professional guidance to hopefully create a successful business venture for both parties.

Essentially, the Franchise Agreement sums up the elements required to make this magic work.

Of course, as with most contracts, in a good franchise system people seldom refer to the Franchise Agreement until it’s time to sign an option to continue.

One final point. For all that the Franchise Agreement can lay down the rules, provide the parameters and document the means of working together it cannot detail the most important attributes of a successful relationship – attitude, honesty, integrity.

About the author Nigel Toplis

Nigel Toplis is the Managing Director of The Bardon Group. Nigel sees his key role as providing the vision and direction for each of the businesses, developing new income streams - across the board, recruiting customer focused and passionate Franchise Owners and providing business and management support to my Franchise Owners.

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