If you are thinking of buying a franchise, what do you need to know?

Purchasing a franchise can be an easier alternative than setting up a business from scratch. The franchisor has already put in place the business models and has existing relationships with suppliers. You are also buying into a recognised brand that will likely come with an existing client/customer base.

A Franchise agreement is the agreement between yourself/your company and the franchisor which sets out the terms under which you can operate the franchise. These are onerous documents in that they impose an array of legal obligations on the franchisee while at the same time can give wide ranging powers to the franchisor.

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Get the right advice from the start!

The purchase of a franchise can be a long-term investment. As such it is important to receive legal advice prior to signing the franchise agreement to understand the obligations imposed on you so you can make an informed decision about whether to proceed.

When you purchase a franchise, depending on the arrangement with the franchisor, you may also be leasing the premises the franchise operates from. It is important that you receive legal advice on the lease at the same time as you receive advice on the franchise. The main reason for this is that you need to ensure that the term of the lease matches the term of the franchise agreement. Otherwise you could find yourself in one of the following situations:

  • the lease is for a shorter term than the franchise. You may have to vacate the premises at the end of the lease but you are still required under the franchise agreement to keep operating the franchise; or
  • the lease is for a longer term than the franchise agreement. In this situation you would have to keep paying rent for the term of the lease even though may not be able to operate a business from the premise.

If you are looking at buying a franchise, contact one of our team at Collins and May Law. We can advise you on the franchise documentation and lease to ensure you make are making an informed decision and understand your obligations.

Get the right advice from the start! Contact us today

If you are thinking of selling a franchise, we can assist with the sale. We can advise you on the process under the franchise agreement which must be strictly followed. If not, you could find yourself in default under the franchise agreement and the default provisions will apply. We will give you advice on any fees that may be payable on the sale so you can take these into account when agreeing upon a sale price.