Legal Brief: With franchising law, experience counts
Franchise agreements are specialised commercial agreements and commonly contain a wide range of provisions which are peculiar to franchising. Mike Barlow of specialist franchise lawyers Leathes Prior explains
A well drafted agreement will be a comprehensive document and should comply with the British Franchise Association's (bfa's) code of ethics. This code deals with the essential minimum terms to be included in any agreement in relation to matters such as terms of payment, the use of the franchisor's system, the right of the franchisor to adapt the system or provisions relating to termination.
Potentially onerous terms in many franchise agreements may lead legal representatives inexperienced in franchise matters to advise a franchisee against proceeding. It is, of course, necessary to obtain a balanced view in order for a franchisee to be able to weigh up the commercial advantages of embarking on any new business venture against the possible disadvantages arising from the nature of the legal agreement.
An experienced specialist franchise lawyer will be familiar with the structure of such agreements and able to identify any unusual provisions or areas of concern. In particular an experienced lawyer will be in a good position to explain why certain provisions are considered necessary (and usual) in the context of franchising.
Although it is the case that franchise agreements tend to be weighted in favour of the franchisor, this does not mean that individual terms are not negotiable (despite what the franchisor may say). If a franchisor is new to the marketplace or is keen to recruit franchisees, valuable concessions may be elicited. An experienced franchise lawyer is likely to be better placed than a non-specialist lawyer to identify which issues may be capable of negotiation and, if required, to handle the negotiations for the franchisee. The position with most contracts is that, once they have been signed, they tend to be filed away and only see the light of day if there is some uncertainty or dispute as to the rights or obligations of one of the parties.
It may be the case that a bfa affiliated firm will be able to provide further information or contact details in connection with particular franchises either as a result of experience of dealing with the franchise in the past or through professional contacts so as to help to assist the franchisee to make an informed decision. Certainly those firms experienced in dealing with franchise disputes will be well placed to highlight the types of issues which may cause problems in the future. Understandably, franchisees will not be considering the likelihood of disputes arising when taking on a franchise - it seems rather negative to set out on a new venture thinking it may all end in tears! That said, when instructing a lawyer it is prudent to establish whether, in the event of a dispute arising, your legal representative will have the support of a team experienced in handling franchise disputes.
Experience of dealing with contentious franchise matters will mean that a franchisee's lawyers will be in the best position to explore the possibility of resolving disputes efficiently and cost effectively whether through the bfa's resolution dispute procedure or other more formal means. This is likely to be further aided where the lawyer has been involved in advising and negotiating the terms of any particular agreement.