What legal agreements are needed when franchising my business?
When you franchise your business there are several franchise legal agreements and other legal considerations, before we go onto legal agreements we need to look at other potential legal pitfalls;
Trading company & franchise company
You have an existing business, this could be a Limited Company, Sole Trader or Partnership. Most new Franchisors ( the business that is franchising ) opt to create a new business for the franchising operation to protect the existing core business. When you do this you will need to grant this new business access/rights to use of your intellectual property such as name to trade, logo etc ( see below )
You need to ensure your trade name & logo are protected, further details of how to do this can be found at https://www.gov.uk/government/organisations/intellectual-property-office
Now onto the franchise legal agreements you will need, which are;
Franchise deposit agreement & NDA
When you meet prospective franchisees ( the potential investor in your franchise ) you have to disclose certain information, some of which may be confidential. Therefore a non disclosure agreement ( NDA ) will be required either at the first meeting or if nothing confidential is being disclosed until further through the process then the NDA will need to be signed then, possibly as part of a franchise deposit agreement.
A franchise agreement can be any term but most are 3-5 years. The agreement set’s out the relationship between you ( Franchisor ) and the person buying the franchise ( Franchisee ). Franchise agreements are lengthy and can be 40-50 or up to hundreds of pages in length. When instructing a franchise lawyer its your responsibility to tell them exactly what you want to achieve with the franchise agreement, not just fill in the blanks. You are tied together with the Franchisee for many years so the franchise agreement must protect both parties but must also take into account your objectives as a Franchisor and what your long term business goals are as well.
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