Should You Get Your Franchise Agreement Reviewed Before You Sign?

A franchise agreement is one of the most significant contracts you will ever sign. It commits you to a brand, a system and a set of obligations for five, ten, sometimes twenty years, and it is almost always drafted by the franchisor’s lawyers to protect the franchisor. That does not make it a bad deal. A well-run franchise depends on consistency, and consistency depends on a firm agreement. But it does mean you are signing a document written by the other side, and you should understand exactly what it says before you commit your savings and your next decade to it.

This article explains what a franchise agreement actually covers, the clauses that most often catch new franchisees out, and why a review by a specialist franchise lawyer is worth far more than a quick read by a general solicitor.

What a franchise agreement actually is

The franchise agreement is the contract between the franchisor, the brand owner, and you, the franchisee. It sets out what you are buying, what you can and cannot do, what you pay, and what happens if things go wrong or come to an end. Unlike many commercial contracts, it is rarely a negotiation between equals. Most franchisors issue the same agreement to every franchisee, partly because the British Franchise Association expects networks to treat franchisees consistently. So in practice your influence over the wording is limited. What you can control is whether you understand it, and whether you are comfortable with what it commits you to.

The clauses that catch people out

Most disputes between franchisors and franchisees come back to a handful of clauses that were never properly understood at the outset. These are the areas worth the closest attention:

• Fees. Beyond the initial franchise fee, you will usually pay an ongoing management service fee and an advertising or marketing levy. Check how these are calculated, whether they are a percentage of turnover or profit, and whether the franchisor can increase them.
• Territory. Is your territory exclusive, and is it large enough to support the business you are being shown? Look carefully at whether the franchisor can sell into your area online or through national accounts.
• Term and renewal. How long does the agreement run, and on what terms can you renew? Some agreements allow the franchisor to change the deal significantly at the point of renewal.
• Termination. What gives the franchisor the right to terminate, and how balanced are those grounds? Heavily one-sided termination clauses are a common warning sign.
• Resale and exit. If you want to sell your franchise, what are your rights, what can the franchisor charge, and can they block or control the sale?
• Restrictive covenants. These limit what you can do during and after the agreement, including non-compete restrictions that can affect your livelihood once you leave the network.
• Digital and online trading. Older agreements often fail to address e-commerce and online lead generation, which can leave your territory exposed.

Why a general solicitor is not enough

A high-street solicitor can tell you whether a contract is legally sound. What they often cannot tell you is whether the terms are normal for franchising. A 10% management service fee might be perfectly standard in one sector and unusually high in another. A two-year post-termination non-compete might be reasonable or excessive depending on the model. Franchising has its own norms, its own code of conduct through the British Franchise Association, and its own commercial logic. Reviewing a franchise agreement well means assessing it against that context, not just against general contract law.

What a specialist review gives you

This is where a dedicated franchise agreement review earns its place. At The Franchise Consultant, every review is carried out by Richard James, a Legal 500-recognised franchise lawyer with more than twenty years advising franchisors, franchisees and investors. He assesses your agreement on both legal and commercial grounds, benchmarks it against current UK franchise norms and bfa standards, and sets out the findings in a plain-English written report with a clear executive summary at the top.

The review is a fixed fee of £499 + VAT, with the written report delivered within five working days and a 30-minute call to walk you through it. As a bfa Advisor Member consultancy with over 100 years of combined team experience, we look at your agreement the way an experienced operator would, not just the way a lawyer would. You can see everything the review covers on our franchise agreement review page.

Read it before you sign, not after

The time to understand a franchise agreement is before you commit, while you still have the option to walk away or ask questions. Once you have signed, the terms are set for years. A few hundred pounds and five working days spent understanding exactly what you are agreeing to is a small investment against a decision of that size.

If you have been handed a franchise agreement and want to know exactly what you are signing, book a call or arrange your franchise agreement review today.