Franchising Lawyers in Newcastle
A franchise is a business structure where one business operates under the trading name of another business’ established brand. The business granting the right to use its name is known as the franchisor and the business being granted the right is known as the franchisee.
Advice for Franchisees
There are many advantages of the franchise model for franchisees, including the increased commercial certainty that comes with providing known goods or services, the use of streamlined procedures and a shared marketing plan.
Franchisees can, however, be in a vulnerable position. A franchisee will be provided with a variety of complex documents such as the Franchise Agreement and Disclosure Document as well as leases and supplementary contracts. When the franchisor is a large entity, there is often an imbalance in bargaining power when it comes to negotiating the terms of these documents. For this reason, it is important that any prospective franchisee seeks legal advice.
Steps in the franchise process
Decide which franchise to buy: Choosing the right franchise for you is extremely important. You should look at franchises which you have an interest in; however, it is advisable to focus particularly in industries in which you have experience. Potential costs and the availability of finance are also major considerations.
Investigate the franchise which you intend to buy: This will involve as assessment of matters such as the profit of the franchise and where each franchise outlet is located. The relevant Disclosure Document will be important at this stage of the process. The Disclosure Document is used by the franchisor to set out important information about the franchise that is required by law to be provided to prospective franchisees. Such information includes details about current and past franchisees, the business experience of the franchisor, details of any criminal or insolvency proceedings that have been commenced against the franchisor, and the costs that must be outlaid by franchisees.
Obtain legal advice about the franchise documents: These documents include the Franchise Agreement, Disclosure Document and any supplementary agreements such as leases. It is crucial that you have a solicitor review these documents for you. The Franchise Agreement outlines the terms of the franchise relationship. It typically includes such matters as the duration of the relationship, options for renewal of the relationship, fees payable by the franchisee and the obligations of both parties. At Berryman Partners, our experienced solicitors will help you understand the documents.
Negotiate with the franchisor: The franchisor may want you to enter into a “Heads of Agreement”. This is a document which states that you have come to an agreement in principle, pending the later execution of the more formal Franchise Agreement. It is important that you understand the terms of the agreement and that you are comfortable with them as they will govern your commercial relationship with the franchisor and greatly affect the operation of your business.
Berryman Partners can advise you at every stage of the franchise process. We combine a friendly approach with the thoroughness and professionalism you would expect from a leading law firm. We listen to you so that we understand every aspect of your business to provide you with a comprehensive service.