How does a franchise agreement work?

Ever wondered what a Franchise Agreement really is and what it’s purpose is? Or have you received a draft agreement previously and been overwhelmed at the length of the document? We’re answering some key questions about Franchise Agreements in this blog.

What is a Franchise Agreement?

A Franchise Agreement is a legally binding document, entered into between the Franchisor (main company) and the Franchisee (business owner). The document is essentially, the rule book for the relationship between the two parties. It sets out the obligations and expectations of the franchisee, and also of the franchisor. A Franchise Agreement covers critical things like your franchise fees, how you should operate your business, how the franchisor will support you in doing so as well as things like what to do if either party is in breach of the agreement and how to resolve disputes.

It is the Franchise Agreement that formally grants you the franchise, to operate as your business. Without a Franchise Agreement, you can not operate your franchised business.

What should I do when I receive a Franchise Agreement?

When you receive your Franchise Agreement you should do two things:

• Read it! Thoroughly!
• Take it to your advisor; accountant, legal or business for them to review also

You should ask A LOT of questions about what different parts of the Agreement mean if you don’t understand. Throughout our process at James Home Services, we try to give you as much information as possible about what’s in the Franchise Agreement, there are no secrets over here! But it is still your responsibility to ensure you read it, understand it, and ask questions until you do.

What should I look out for in a Franchise Agreement?

You should make sure that you understand what your reading. Make sure the fees you will pay are clear. Make sure you clearly understand your rights and obligations under the Franchise Agreement, as well as what you can do if you feel the Franchisor isn’t holding up their obligations to you as a franchisee.

Also make sure you read the Disclosure Document. It’s another document sent to you at the same time as the Franchise Agreement, and it discloses a lot of relevant information about the Franchisor and the franchise network to you, to inform your decision.

What should I look for in a Franchise Agreement?

Look for simple language and clauses that above all, are fair to both parties.

The Clauses in our Franchise Agreement are clear. We have made a dedicated effort to remove as much ‘jargon’ as possible, and simplify the language we use so it’s down to earth and understandable. We want to you feel confident your entering into the Agreement, knowing what it binds both parties to. We don’t have secrets, and if there’s something about your Agreement you don’t understand, just ask us! We take your questions very seriously, and we take considerable time to explain the answers to you as well as put them in writing for your future reference.

What’s the process to enter into a Franchise Agreement?

When you’re first presented with your Franchise Agreement… you can’t sign it straight away. That’s because the law provides a 14 day period where you must have the Agreement for review, with no pressure to sign. After that, then you can execute your Franchise Agreement. Once you’ve executed your Franchise Agreement, you are granted another 14 day period by law as a ‘cooling off’ period. That means, at any time during either period, you can simply walk away from the opportunity.

This is designed to protect you; to ensure you are never pressured into signing a Franchise Agreement.

We never use pressure or sales tactics with any potential franchisee. Buying a business is a big decision. We give you lots of information and step you through the process, but we never pressure. It’s just not how we work. Our sales teams aren’t driven by KPI’s or ‘numbers’; they’re driven by helping people reach their business ownership goals, and we know that’s not always for everyone.

If you’re interested in starting your own James Home Services business, get in touch today!