Services for Franchisees
Fixed fee reports for franchisees
It is essential before buying a franchise (which can cost thousands of pounds) that prospective franchisees understand the terms of the franchise agreement that they're being asked to sign up to with the franchisor. The agreement will set out key information including how many years the agreement will last, what fees must be paid and how the franchised business must be run on a daily basis. It will also explain whether or not the agreement can be renewed, how the franchised business can be sold and the steps a franchisee will need to take to achieve a renewal or sale. Last but not least, the agreement will also list the restrictions on ex-franchisees after they have left the franchise or sold their business.
To ensure you understand the key terms of the agreement our Franchising team offers a service considering and reporting on franchise agreements at a fixed price. The report draws your attention to the main points in the agreement and their implications for you, indicates how the agreement compares with normal franchising practice, highlights any particularly onerous provisions and indicates points for you to raise with the franchisor.
If you would like us to do your report please contact us mentioning our fixed fee service and indicating the name of the franchise (so that we can check that we do not act for that franchisor). In due course we will need to see your agreement and background information. Once we have the franchise agreement and any background information, we aim for a five working day turnaround to get our report back to you.
Purchase or sale of an existing franchise business
Most potential franchisees think only of acquiring a franchise from the franchisor. There can however be substantial advantages to buying a 'second-hand' franchise from an existing franchisee. Our Franchising lawyers act for existing and potential franchisees in the legal process of franchise re-sales. We help them to understand the transaction and its risks, whether they are buying or selling and, by cost benefit analysis, to decide whether those risks are worth guarding against in a purchase or sale contract.
Almost all franchise agreements give the franchisee the right to sell to a new franchisee approved by the franchisor and most franchisors will approve a sale provided they can train the purchaser to their standards and get their costs paid. Sometimes the purchaser has to pay a new franchise fee; sometimes the seller pays a share of the sale price to the franchisor.
An existing franchised business may cost little more than a new franchise with the costs involved in setting up from scratch. It also has the advantage of a trading history, an existing client base, possibly a trained workforce and already depreciated assets. Unfortunately, however, it may not be all that it seems or could bring unexpected liabilities with it.
Our experienced Franchising team can offer advice at every step of the transaction and help with all of the key aspects:
- identification of the tangible and intangible assets to be bought or sold
- employee transfers
- liability transfers
- tax – corporate and personal
- property sales or transfers of leases
- accurate disclosure of trading history
We can review and report on the franchisor's standard re-sale documents or prepare the appropriate sale and purchase contract for you, to permit an easy and cost effective franchise re-sale.
Franchisees and property
Our property franchising team is able to advise franchisees throughout their period of involvement with franchise property. Typical areas of advice are:
- advising on a franchisor's suggested method of providing the franchisee with a property and considering whether any alternative set up would be preferable
- investigating in to and reporting findings on a prospective property
- negotiating and reporting on agreements to acquire a freehold or leasehold property
- carrying out freehold and leasehold acquisitions
- negotiating new leases and reporting on new and existing leases and how their obligations tie in with the franchise agreement
- negotiating and reporting on licences permitting alterations to the property
- negotiating and reporting on personal guarantees and rent deposits
- dealing with the mechanics of legal completion of the property documents including any monies payable on completion
- dealing with the Inland Revenue regarding payment of Stamp Duty Land Tax and completing Land Registry registrations
- dealing on behalf of franchisees in situations of franchisor insolvency; and
- advising on the legal implications of specific franchisee leasehold obligations, such as the requirements at rent review or the enforcement of a forfeiture clause
Disputes with the franchisor
Litigation can be hugely expensive and the chances of success for a franchisee can be slim since franchise agreements are invariably favourable to the franchisor. It is almost impossible to recover a franchise fee paid to a bad or fraudulent franchisor and, once a franchisee signs up to a franchise agreement, they are usually committed to the full term. If a franchisee walks away from the franchise, the franchisor may try and claim damages equivalent to what they would have expected to receive in monthly fees for the remainder of the term.
However, disputes don't always signal the end of the road for a franchisee. We can help with mediation and informal discussions, which can result in the parties continuing with the franchise relationship or allow the parties to go their separate ways without the need for further time and money needing to be spent on resolving the dispute.
We can undertake an initial review of a dispute, often for a fixed fee. This aims to provide a franchisee, if possible, with an indication of the key issues, strengths and weaknesses of the claim and options for getting it resolved.
Costs are always a priority and unhappy franchisees should be aware that the costs involved in any dispute can often outweigh the chances of success. We will give you the best estimate we can of the likely cost of the options open to you and the prospects of success.
Dissatisfied franchisees can often make more cost-effective use of our services if they club together to purchase advice and assistance in certain circumstances. This can be very effective if there are a number of franchisees who wish to break out of the relationship because the franchisor has mis-sold them the franchise in the first place or has not provided the back-up that the franchisees could reasonably expect. In these circumstances, because an individual franchisee's business could operate without assistance from the franchisor, it can be worthwhile for a group of dissatisfied franchisees to spend substantial sums on engineering a break away or a change in the terms of their franchise agreements. Our Franchising team has done this successfully for a number of franchisees.
Other franchisee services
As well as undertaking a review of your franchise agreement for a fixed fee, assisting with property transactions, disputes or business purchases, our Franchising lawyers can also help you with other aspects of purchasing and running a franchise including:
- reviewing confidentiality agreements and deposit agreements, which you may be asked to sign before purchasing the franchise
- setting up a company or partnership if you intend (or are required by the franchisor) to trade using one of these vehicles
- providing a registered office and/or company secretarial services such as assisting in the drafting and filing of board minutes and forms relating to the appointment or resignation of directors, any changes to a directors details, changes to accounting filing dates, assistance with the new Register of Persons With Significant Control and drafting and filing of the Confirmation Statement, the document which has taken the place of the annual return
- advising on the terms of any side letter agreed with the franchisor
- putting in place standard employment contracts and policies for your staff (if these are not prescribed by the franchisor)
- checking software licence and maintenance agreements
- advising on how to deal with a failing business
- seeking funding from banks or other lenders including advising on personal guarantees and security documents