Franchise contract | Franchising legal advice

Franchising AGREEMENT LEGAL AND CORPORATE CONSULTING

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We draft: franchising contracts in line with the latest industry rulings, master franchisee contracts for internalization, Franchising Operating Manuals, and then take care of the entire process of standardizing operational processes.

The contract is the heart of franchising, we call it that because many of the problems that can occur between parent company and franchisees, arise from its sloppy drafting and/or misunderstanding.

If you already have one, do not hesitate:

In franchising, the legal aspects are complex because a contract must bring together very different aspirations, for example:

  • Penalties
  • Covenant not to compete
  • Turnover minimums
  • Controls and limitations
  • Training guarantees
  • Regulation of franchisee support
  • Relationship with other franchisees
  • Territorial exclusivity
  • Brand protection
  • Privacy
  • And much more

Added to this is the fact that in a franchise contract, a balance must be struck between two parties who have different power: on the one hand, the franchisor who imposes the rules of the game, and on the other hand, the franchisee who, although an independent entrepreneur, is not so free in running his business.

For all these reasons, the risk of confrontation is real and one should not fall into the mistake of delegating the formulation of the contract to accountants or lawyers who do not specialize in the field. Franchisors, who start off on the wrong foot in the legal part, are more likely to expose themselves to liability and, therefore, also end up in court to defend themselves.

In a franchise, the legal documentation is enhanced by the operations manual, which also takes on legal significance. The operations manual is the document that contains the details of your business model and the rules that you and your franchisee are required to follow for the development of a profitable relationship over time.

The manual should be viewed as an extension of the franchise agreement. To understand this, one need only think of the reasons why franchisors and franchisees end up before the courts. In many cases, the grounds concern the failure to transfer know-how, which is defined, not surprisingly, precisely in the operations manual.
To sum up, an operations manual is effective if it meets three conditions:

  1. is clear in form, well written in simple language so that those who read it cannot make mistakes in its interpretation;

  2. it is detailed in content, presenting no element left to chance, but every aspect is thoroughly explained to limit the franchisee’s freedom of action;

  3. it is beautiful to look at, a great importance is given to the graphic layout and the support of flowcharts that facilitate the reading and understanding of the text.

Do you already have one?

The handbook points out that franchising is primarily an operating model that, through guidance, enables the transfer of know-how between the franchisor and the franchisee. It should be conceived dynamically, as it must be able to follow three changes:

  • the habits and needs of customers;

  • market developments;

  • the new procedures

  • technology that has proven to disrupt the business models of entire industries;

More detailed information on the legal aspects to be considered in a franchise agreement and secrets on how to draft a legally unassailable operating manual can be found in the best-selling book, Let’s Franchise – 69 Secrets to Creating a Successful Franchise Network, particularly in chapters 5 and 6.

If you haven’t yet made your own Operations Manual or believe yours is not done properly.

Trust our professionals to produce a legally unassailable franchise agreement and operations manual.

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