Franchise Agreements

Franchise Agreements are important because:

● They are a huge part of how a franchise business works,
● The agreement that is made is a long standing one that can be difficult to get out of,
● The terms of the agreement will have a huge effect on how much money each party will make as a result of the Franchise Agreement,
● They usually involve a substantial financial commitment.

From the franchisor’s perspective, the usual deal is – they are paid a joining fee and an agreed amount of the profits or turnover of the business for the franchisee to use the brand and business model. This helps the franchisor have a relatively risk-free expansion to their operations and further the reach of their brand image.

From the franchisee’s perspective, the usual deal is – they will get access to the franchisors tried and tested brand, business model and their current promotions. Product supply, training, marketing and merchandising may also be part of the package. This gives them an opportunity to capitalise on the success of a larger business that wants to branch out.

Usually, there won’t be an option to terminate your Franchise Agreement before the terms around the duration of the agreement that you signed have come to an end. However, some franchisors may offer their franchisee a way to terminate their agreement and or the ability to sell the franchise on to someone else. These provisions will most likely revolve around specific conditions and financial requirements.

The main difference between a Franchise Agreement and a Joint Venture is that as a franchisee, your business is subject to the controls of a bigger business which will make decisions on the direction and operations of their business which you will have to comply with. Whereas, if your business is a Joint Venture then you will be a partner in the business, often on equal terms, and will have a say in these decisions.