Franchise Solicitors

Our Franchise Lawyers specialise in advising franchisors on national and internal franchise projects, including the following:

• Implementing pilot operations
• Drafting the required franchise documents and coordinating local advice in international franchising projects
• Structuring and setting up the franchise network
• Updating or refreshing of the franchising agreement on renewal
• Franchise resales, including intra network or external franchise disposals.

The franchise lawyers at Herrington Carmichael have a wealth of experience in both (i) acting for new franchisors in setting up their franchise networks and identifying the key considerations a new franchisor should make before starting a new franchise venture, and (ii) acting for established franchisors in review, refreshing or expanding their franchise networks.

Our full services law firm can deal with the entire spectrum of legal services required by franchisors, including property, employment or dispute resolution to ensure comprehensive protection for the franchisor’s brand.

Our Franchise lawyers specialise in advising franchisees on UK franchising projects, including the following:

• Reviewing the franchise agreement
• Advising on non-standard market positions or high risk provisions contained in the franchise agreement
• Securing a property to operate the franchise unit from
• Advising on employment law relating to the franchisee’s workforce
• Updating or refreshing of the franchising agreement on renewal
• Franchise resales, including intra network or external franchise disposals
• Any disputes which arise under the franchise agreement

The franchise lawyers at Herrington Carmichael have a wealth of experience in both (i) acting for single unit or multi unit franchisees in undertaking a new or existing franchise project, in identifying the key considerations a franchisee should make before signing the franchise agreement, negotiating any required amendments and assisting with renewal or variations. Further, our specialist franchising M&A teams advise on any acquisitions or disposals of existing franchises.

Our full services law firm can deal with the entire spectrum of legal services required by franchisors, including property, employment or dispute resolution to ensure comprehensive protection for the franchisee’s investment.

Business franchising involves an established business (known as the franchisor) allowing a third party (known as the franchisee), to trade as their own businesses under the franchisor’s brand. This licence is usually granted on the condition that the franchisee pays the appropriate fee to the franchisor whilst following its standard business model. The franchisee will usually also receive training for key staff, ad hoc assistance with operational matters and centralised marketing.

Why Franchise?

Proven to be a fast growing sector, many new business owners are turning to franchising as a way to secure a low risk start up business, which avoids the usual initial costs of starting a new business and benefits from an already established brand with continued support from a franchisor.

Established business owners are increasingly turning to franchising to achieve organic growth in terms of territory and revenue. Many franchisors are reaping the benefits of increased brand reputation from setting up national franchise networks with the additional support of the franchisees.

The Franchise Agreement contains the principal terms upon which the franchise will be granted and governs the legal relationship between the parties. It includes:

The term of the Franchise Agreement and renewal provisions;

• The payment obligations of the franchisee
• The training demands of the franchisor
• The termination provisions
• The resale provisions of the franchise

A franchisee should always review the provisions of the Franchise Agreement in depth before signing the agreement, since they will be unable to alter the terms of the Franchise Agreement post signing, without the franchisor’s consent (which is unlikely to be forthcoming). It is important for the franchisor to keep the intended business relationship in mind whilst carrying out a review of the Franchise Agreement, because franchisors typically utilise template documents across their franchise network which may not necessarily reflect the intended agreement.

The key considerations for franchisees when reviewing a Franchise Agreement are summarised below.

Personal Guarantee
The personal guarantee will likely cover both the financial obligations and the performance obligations of the Franchisee.

Franchisee Fees

• Initial Fee – An Initial Fee will usually be due upon signing of the franchise agreement.
• Service Fee – The Service Fee is calculated as a percentage of the franchisee’s gross monthly receipts.
• Advertising Levy – The Advertising Levy is often set at around 2.5% of Gross Monthly Receipts.

Territory
The Franchisee should ensure it is granted exclusive right to trade in a particular location in the Franchise Agreement.

More information about key legal considerations when reviewing a Franchise Agreements, can be found in this following article ‘Key legal considerations for Franchisees‘.

A franchisor must be cautious in protecting its brand, whilst capitalising on expansion opportunities through franchising. The key legal considerations to make are:

Structure – this could include direct franchising or giving a key franchisee a master license to grant further franchises in a given jurisdiction.

Pilot operation – using a “test run” to refine processes and identify any legal issues before launching a full franchise network.

Legal documentation – ensuring comprehensive protection to a franchisor’s brand, and ensuring there are legal protections in place, should the brand be damaged.

Property – securing the appropriate locations from which to grow the franchise network for the long term. 

The Operations Manual governs the day to day running of the business. It contains the methodology and quality control provisions that the franchisee must adhere to whilst operating the franchise. Given that the document contains commercially sensitive business “know how”, a franchisor usually requires the franchisee to sign a confidentiality agreement prior to disclosing a copy of the Operations Manual.

The operations manual is usually an evolving document which can change over time when business processes are streamlined or refined. The franchisee should be comfortable with the overarching principles set out in the Operations Manual prior to signing the Franchise Agreement. Breaching the Operations Manual can also lead to a breach of the Franchise Agreement which could trigger numerous adverse consequences, including termination the Franchise Agreement.