{"id":10750,"date":"2021-09-06T18:44:28","date_gmt":"2021-09-06T17:44:28","guid":{"rendered":"https:\/\/www.franchiselocal.co.uk\/news\/?p=10750"},"modified":"2022-01-27T11:04:27","modified_gmt":"2022-01-27T11:04:27","slug":"what-is-a-franchise-agreement-and-how-to-properly-analyse-it","status":"publish","type":"post","link":"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/","title":{"rendered":"What is A Franchise Agreement and How To Properly Analyse it"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_88 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #101010;color:#101010\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #101010;color:#101010\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#the-name-game\" >The name game<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#how-long-will-this-be-going-on\" >How long will this be going on?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#time-to-talk-cash\" >Time to talk cash<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#read-all-about-it\" >Read all about it<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#the-learning-curve\" >The learning curve<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#a-turn-up-for-the-books\" >A turn up for the books<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#trade-dress-for-success\" >Trade dress for success<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#time-will-tell\" >Time will tell<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#people-power\" >People power<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#paying-it-forward\" >Paying it forward<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#the-location\" >The Location<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#termination\" >Termination<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"#\" data-href=\"https:\/\/www.franchiselocal.co.uk\/news\/what-is-a-franchise-agreement-and-how-to-properly-analyse-it\/#worst-case-scenario\" >Worst case scenario<\/a><\/li><\/ul><\/nav><\/div>\n<span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time: <\/span> <span class=\"rt-time\"> 4<\/span> <span class=\"rt-label rt-postfix\">minutes<\/span><\/span><p>Setting up a new franchise business is incredibly exciting, and is a dream for many entrepreneurs.\u00a0 Unfortunately, that dream can turn into a nightmare if the franchisee fails to properly analyse and understand the franchise agreement which they are given.<\/p>\n<p>The franchise agreement is one of the most important documents that a franchisee will ever sign and, in this article, we\u2019re going to take you through the things to look out for before signing on the dotted line.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"the-name-game\"><\/span>The name game<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The first thing to establish when it comes to your franchise agreement is who the major players are.<\/p>\n<p>Before moving forward, you\u2019ll need to know the identity of the party you are getting into business with and, who will be signing the contract. For example, will it be a parent corporation or a master license owner?<\/p>\n<p>If the language in the contract regarding this is vague, this could be a red flag.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"how-long-will-this-be-going-on\"><\/span>How long will this be going on?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Next, you\u2019ll want to be clear on the duration of the contract as this is the length of time that you will own your business and how long you will be paying <a href=\"https:\/\/www.franchiselocal.co.uk\/news\/franchise-royalty-fees\/\">fees<\/a> to your <a href=\"https:\/\/www.franchiselocal.co.uk\/news\/the-difference-between-a-franchisor-and-franchisee\/\">franchisor<\/a>.<\/p>\n<p>In general, a franchise agreement will run for five years and, it\u2019s inadvisable to sign a contract stating a much longer term.\u00a0 It\u2019s also important to take a look at the information in the contract regarding renewal; for example, if you choose to renew the contract, will there be a fee and, will this be a full or reduced fee?<\/p>\n<p>Where possible, it\u2019s a good idea to negotiate a reduced fee at this stage, rather than waiting until the renewal date comes along.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"time-to-talk-cash\"><\/span>Time to talk cash<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>With most franchise businesses, you\u2019ll be expected to pay an <a href=\"https:\/\/www.franchiselocal.co.uk\/news\/franchise-royalty-fees\/\">initial fee<\/a> when signing the contract and a <a href=\"https:\/\/www.franchiselocal.co.uk\/news\/franchise-royalty-fees\/\">monthly service fee<\/a>.<\/p>\n<p>The monthly service fee tends to be a percentage of your takings and will either be based on sales or based on profits.<\/p>\n<p>For a franchisee, a service fee based on sales is usually the best option in terms of being financially better off.\u00a0 While you\u2019re at it, scour the agreement for any hidden fees as it\u2019s incredibly important that you know exactly how much your new business is going to cost you, and when.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"read-all-about-it\"><\/span>Read all about it<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>One of the many benefits of becoming a franchisor is that you are able to take advantage of advertising and marketing efforts conducted by the franchisor, such as television advertising.<\/p>\n<p>As great as that is, you\u2019ll usually be responsible for marketing your own franchise;\u00a0 particularly if it\u2019s based in a particular area so, you need to check the terms of this in your agreement. For example, there may be a clause stating a required monthly marketing spend which you\u2019ll need to factor into your budget.<\/p>\n<p>Within this section, check to see if you will be required to conduct a \u2018grand opening\u2019 of your business and, if so, what this should involve and, how much it will cost.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"the-learning-curve\"><\/span>The learning curve<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Any franchisor worth their salt will invest a significant amount of time and money in training new franchisees as this is where the success of their business comes from.<\/p>\n<p>Carefully check the agreement to find out what kind of training will be available to yourself and your employees and, just as importantly, the costs involved with this.<\/p>\n<p>A decent franchisor will not usually expect franchisees to pay for the actual training but, franchisees may be responsible for paying for their own transportation and accommodation during the training period.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"a-turn-up-for-the-books\"><\/span>A turn up for the books<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>As with the training, a reputable franchisor will provide new franchisees with an operations manual.\u00a0 This is extremely important as it will be a vital resource while you\u2019re learning the ropes of your new business and, details of this manual, when you\u2019ll get it and who you\u2019ll get it from, should be detailed in your franchise agreement.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"trade-dress-for-success\"><\/span>Trade dress for success<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The term \u2018trade dress\u2019 refers to items included in the company\u2019s branding, such as logos, images, decor and employee uniforms.\u00a0 Your franchise agreement should include comprehensive direction on the use of these things as well as the cost and, how often certain items should be replaced.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"time-will-tell\"><\/span>Time will tell<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>With most franchise businesses, there will be rules regarding the hours of operation. For example, if your franchise business is a coffee shop, your franchise contract will state the times that your shop should be open to the public.\u00a0 You will need to give this careful consideration to make sure that you are able to fulfil the time obligations as failure to do so may be considered a breach of contract.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"people-power\"><\/span>People power<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In most cases, running your new business will involve employing people to help you.\u00a0 Check the fine print to make sure that you are familiar with all policies and guidelines concerning your staffing.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"paying-it-forward\"><\/span>Paying it forward<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>While you\u2019re excited about your new business at the moment, there may come a time when you want, for whatever reason, to either <a href=\"https:\/\/www.franchiselocal.co.uk\/news\/can-you-sell-a-franchise-10-steps-to-success\/\">sell your franchise<\/a> or transfer it to another person.<\/p>\n<p>Before committing to the franchise, you\u2019ll need to make sure that your contract answers the following questions:<\/p>\n<ul>\n<li>How much control does the franchisor have over this?<\/li>\n<li>How much control will you have over this?<\/li>\n<li>Will the franchisor have approval rights on your buyer?<\/li>\n<li>How much of the sale profits will need to be paid to the franchisor?<\/li>\n<li>When will the sale fee need to be paid to the franchisor?<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"the-location\"><\/span>The Location<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Lots of franchise businesses are geo-specific and, so, you\u2019ll need to make sure that you know exactly which area your business covers.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"termination\"><\/span>Termination<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>You\u2019ve already checked the duration of your franchise ownership but, what happens if you want to pull out before then?\u00a0 Your agreement should clearly detail the circumstances in which your contract can be terminated and any penalties which may be charged.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"worst-case-scenario\"><\/span>Worst case scenario<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>We\u2019re all aware that we won\u2019t live forever and, it\u2019s always a good idea to make sure that your contract states clearly the process involved should you die.\u00a0 For example, will your spouse or partner be able to take over the business or, will it simply revert to the franchisor?<\/p>\n<p>You\u2019ll also want to check for the process regarding natural disasters which may mean that your business is out of action through no fault of your own.<\/p>\n<h4>Conclusion<\/h4>\n<p>A franchise agreement is designed to make sure that both franchisor and franchisee know where they stand in terms of obligations and costs.\u00a0 In this article, we\u2019ve listed the important things that you should be looking out for and, while this is certainly helpful, you should always take advantage of the services of a legal professional to make sure that your interests are protected.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Setting up a new franchise business is incredibly exciting, and is a dream for many entrepreneurs.\u00a0 Unfortunately, that dream can turn into a nightmare if the franchisee fails to properly analyse and understand the franchise agreement which they are given. The franchise agreement is one of the most important documents that a franchisee will ever [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":10751,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[29],"tags":[],"class_list":["post-10750","post","type-post","status-publish","format-standard","has-post-thumbnail","category-tips-advice"],"acf":[],"jetpack_featured_media_url":"https:\/\/www.franchiselocal.co.uk\/news\/wp-content\/uploads\/2021\/09\/How-To-Properly-Analyse-A-Franchise-Agreement.jpg","_links":{"self":[{"href":"https:\/\/www.franchiselocal.co.uk\/news\/wp-json\/wp\/v2\/posts\/10750","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.franchiselocal.co.uk\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.franchiselocal.co.uk\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.franchiselocal.co.uk\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.franchiselocal.co.uk\/news\/wp-json\/wp\/v2\/comments?post=10750"}],"version-history":[{"count":0,"href":"https:\/\/www.franchiselocal.co.uk\/news\/wp-json\/wp\/v2\/posts\/10750\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.franchiselocal.co.uk\/news\/wp-json\/wp\/v2\/media\/10751"}],"wp:attachment":[{"href":"https:\/\/www.franchiselocal.co.uk\/news\/wp-json\/wp\/v2\/media?parent=10750"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.franchiselocal.co.uk\/news\/wp-json\/wp\/v2\/categories?post=10750"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.franchiselocal.co.uk\/news\/wp-json\/wp\/v2\/tags?post=10750"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}