Many people join a franchise as a cheap way of going into business for themselves. Sometimes it works out well and sometimes it doesn’t, for various reasons. It is important to understand franchise contracts before you sign up. These have been drafted by experienced commercial lawyers and are quite comprehensive.
Here are 10 points to consider when it comes to franchise contracts.
- The contract for a franchise is non-negotiable. If something does not suit you, there is no way to change it. This is because companies that run franchises find it easier and fairer if all their franchisees are on the same page.
- If there is something in the contract that you don’t understand you can ask for a letter of clarification. This will usually be given because it helps to establish trust between the two parties.
- If the franchise you have decided to buy agrees to negotiate certain terms, it should be considered a red flag, since typically these contracts are non-negotiable. It could mean that they don’t have many franchisees because the product is simply not selling well.
- The franchise contract will be seemingly written from the company’s standpoint and will benefit them above the franchisee. This is partly to protect the franchise system, including the brand and integrity of the product. While you have to do everything they say, it ensures that they keep control of the product and that each of their franchisees do things according to how they want them. They believe they know what is best to sell their brand and they have more experience than most franchisees.
- The franchise contract is full of must do’s and can’t do’s that you are expected to obey. If you don’t like it, the only recourse is to find a different franchise with different terms you agree with or are comfortable with.
- Remember that many of the rules are to restrict other franchisees from operating in a manner that could be injurious to your franchise. For example, some people may think they have a brilliant idea for getting more business for their own franchise that will cut into your jurisdiction and so harm your business.
There are many different kinds of franchises available. It is important to ensure you are cut out for running the one you choose. It should be something that you are interested in doing and have some talent for. For instance, if you dislike talking to people and your franchise requires a lot of customer interaction, it may not be the best fit for you.
Running a franchise is just like running your own business, even though it does not really belong to you. It takes effort and time to get it right, just like a real business, so be sure it is the right thing for you before signing up.