Why Is It Important To Have A Franchise Agreement In Place?
A franchisor should have a franchise agreement drawn up ahead of franchise launch, it is there to protect both parties.
Herein, we explore some of the core areas that should be defined in your franchise agreement.
There are typically two types of franchise agreement:
- A standard franchise agreement which covers single tier licensing from the franchisor to the franchisee.
- Master franchise agreement which grants rights over intellectual property to a licensee with obligations to operate franchise in a particular territory.
A franchisor should ensure that one agreement is in place, and it is non-negotiable for prospective franchisees, ensuring all comply with the same agreement. It would be considered unethical to change the franchise agreement to suit individual franchisees.
The agreement is there to protect both parties, it lays out the obligations of both Franchisor and Franchisee, from beginning, whilst trading and if termination of the contract is applied.
Specific to each individual franchisee, the agreement should detail a commencement date as agreed by both parties and an initial term, which will be standard for all. The European Code of Ethics for Franchising requires a term to be long enough to allow the franchisee to benefit from their initial investment. Also ensure that the renewal date is clearly defined.
The Avanti Group (UK) Franchise Ltd have had their Franchise Agreement drawn up by specialist solicitors who are British Franchise Association (BFA) approved.
Payment; The payment terms and conditions should be unambiguous, upfront costs and ongoing fees must be clearly defined, as should the details of how to make payment and the timeframes in which to make payment, including any cooling off periods for deposit payments paid.
The Avanti Group (UK) Franchise Ltd provide clearly defined payment terms.
Defining territory areas; The agreement should be clear when it comes to the ‘exclusive’ rights of a territory area, as this protects the franchisee from competitors, other franchisees and even the franchisor. Before offering territory exclusivity, the franchisor must carefully define the territory areas and ensure that exclusivity is achievable.
The Avanti Group (UK) Franchise Ltd provides exclusivity for accountancy and taxation. We have generous sized territories based on the number of businesses as advised by various data sources. With the community aspect that Avanti promotes throughout the Avanti Group bookkeeping and accountants work together to provide clients with a unique full service.
Advertising; The Avanti Group (UK) Franchise Ltd allocate a percentage of your fee to national marketing campaigns. We will also provide you with templates to work from. Providing you adhere to the marketing plans and frameworks in place, we also anticipate that you will be involved in your franchise marketing.
Within the training weeks we provide Strategic Marketing & Business Planning to help you on the road to market your business successfully.
Together with the right to run your own Avanti Networking Group generating great connections and new business in your local area.
Training / CPD; It is quite standard for training to be provided either included in the initial fees or free of charge, but further training often accrues further costs. Does the franchisor provide ongoing training, if so what are the costs of this? Find out if there are alternatives to the approved franchisee training that are available, and balance the costs. Most franchisors will require you to be compliant with their training programme to ensure that brand continuity and standards are maintained across the group. Alongside standard training, you can easily ensure your CPD is maintained.
The Avanti Group (UK) Franchise Ltd provide you with a CPD file, where you can log any relevant activities you have completed to maintain your CPD, continued monitoring of this allows us to see if you are complaint with Company standards.
Our initial training weeks provide CPD training on technical aspects of the job, but also in how to run the business, from Marketing to Sales to Administration. During the year we will hold training events for update on CPD.
Obligations of both parties; This is your business; however the franchisor will place restrictions and obligations on the way in which you run your franchise, this is to ensure parity between all franchisees and the franchisor ensuring continued branding and any client dealing with any Avanti Tax Accountants franchise nationally would receive the same high-level standard of service, irrespective of location.
Data Protection; The franchisor is responsible for ensuring that the franchisee is compliant with GDPR. The Avanti Group (UK) Ltd have all relevant policies and procedures in place to ensure that our franchisees know exactly what to do to protect the data of their clients and contacts. Continued monitoring ensures that compliance is maintained.
Get the Franchise Agreement checked by an independent legal representative. Highlight any concerns, ask any questions to the Franchisor to help clarify in your mind that you understand what you are signing. But you will find that most ethical franchisors would not be flexible on changes the agreement.
If the agreement has been drawn up by the appropriate legal personal, and approved by the BFA for example, there should be no reason to change the agreement, if your franchisor was willing to change the agreement, ask yourself “Do I want to work with this franchisor, if they change the agreement for me, who else would they change it for, and what are they willing to change?”