The franchise agreement: understanding what you are letting yourself in for.

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If you take a franchise you will be asked to sign a contract which will be at least 30 pages long. This contract will have been drafted by the franchisor's lawyers and it will look after the franchisor's interests and not yours.

You will be encouraged by the franchisor and your bankers to take independent legal advice which will cost you about £400 + VAT but if the lawyer finds anything wrong with the agreement there is not a lot you can do about it. There is very little scope for negotiation. Franchises are offered on a take it or leave it basis.

To help you to decide whether to take the franchise I have listed some of the terms commonly found in franchise agreements and explained what they are supposed to do.

I have also discussed in greater detail the provisions that in my experience give rise to difficulty. These include:

- "whole agreement" clauses and statements that the franchisee did not enter the contract in reliance on anything said by or on behalf of the franchisor;

- the incorporation of the operating and other manuals into the agreement; and

- the termination clause.

I have suggested precautions that you can take to reduce your risks.

Though there is no specific franchising legislation in England and Wales franchise agreements do not subsist in a vacuum and I mention the statutes and other laws that apply to franchising.

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Published In: Antitrust & Trade Regulation Updates, General Business Updates, Franchise Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Jane Lambert, NIPC | Attorney Advertising

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