As a Franchisor, should I care if a Franchisee doesn’t get legal advice on the Franchise Agreement?
Franchise Agreements are non-negotiable and heavily weighted in favour of the Franchisor. This is completely standard. As such, Franchisees will often look to cut costs and avoid taking proper legal advice on the Franchise Agreement at the outset. Occasionally, franchisee recruitment personnel will go as far as to tell franchisees that there is no point in them taking legal advice, although I’m glad to say this is less common these days. In fact, one of the key benefits of a franchisee taking legal advice is that it helps to protect the franchisor. The reasons we say this are as follows:
The franchisee will have the Franchise Agreement explained to them, in detail. The franchisor will not, therefore, have to explain it to the franchisee themselves (and run the risk of explaining anything inaccurately)
The franchisee will be informed about the enforceability of the Agreement and the consequences for any breach of it (and will be less likely to challenge the agreement or seek to get around it).
In the event of a dispute, a court will see that the franchisee has entered into the agreement with the benefit of legal advice and would not be able to rely on any argument along the lines of “I didn’t know what they were asking me to sign”.
It gives the franchisor comfort that the franchisee is taking its legal obligations seriously.
Does it matter who reviews the Franchise Agreement for the Franchisee?
Yes. All too often a local family lawyer or a property lawyer gets their hands on a franchise agreement. They look at the document and think: “No, this is far too one-sided” before proceeding to take their “red-pen” out and make wholesale changes to the contract. They advise their client – the franchisee – how “unreasonable” the document is and they should not proceed unless the franchisor accepts all the amendments. Not only does this incur significant cost, the franchisee may choose not to proceed with the opportunity, due to the advice of his or her inexperienced - in franchising terms - solicitor. Instead, a franchise agreement should always be reviewed by a lawyer who is an Affiliate of the British Franchise Association. Affiliates are all accredited by the BFA as having significant experience in franchising. Instead of seeking to revise the agreement, a BFA Affiliate will usually focus on preparing a Report on it for the franchisee which explains all the key terms and perhaps suggests some areas where the franchisee needs to seek more information or clarification from the franchisor. The franchisee can send this report to the franchisor, discuss it with them and allow the franchisor to respond to any queries made.
What if a Franchisee insists that they do not want legal advice?
In such circumstances, you should obtain a signed waiver from the franchisee in which the franchisee clearly acknowledges that you, the franchisor, strongly encouraged them to obtain legal advice on the franchise agreement but they declined to do so in their sole judgement and at their own risk. This will help mitigate against a franchisee subsequently trying to argue in court that they were coerced into signing without the opportunity to take legal advice.
What can Albany Fraser Solicitors do for your franchisees?
We are a boutique firm of solicitors who predominantly advise franchisors and franchisees throughout the UK. We are Affiliates of the British Franchise Association and our principal, Andrew Fraser, is one of only a small handful of lawyers who has been awarded Qualified Franchise Professional status by the BFA. We provide a complete service to franchisees which includes:
Reviewing the Franchise Agreement;
Preparing a Report on the Franchise Agreement; and
A follow-up call or meeting to discuss our findings with the Franchisee.
We offer a fixed fee package for this support and are able to provide this at a very competitive price. If you would like more details, please contact: firstname.lastname@example.org