Q: How many different agreements will I have to enter into when buying a franchise?
Apr 13 2007
Answered by: Élise Billy Ask a question
It varies depending on the franchise. Often there is a three stage process, which will mean that you sign a confidentiality deed, then a deposit or intent to proceed agreement, and then the main franchise agreement. The main franchise agreement may be the only agreement in some franchises, but in others you may have to sign other documents such as:
- an umbrella agreement (for multi-site franchises)
- an IT agreement or software licence (if applicable)
- a deed of confidentiality or confidentiality with restrictive covenants (these are clauses that stop you competing or taking employees or customers after termination)
- a deed of guarantee (if you use a company as the franchisee – sometimes the guarantee is within the main franchise agreement itself, and sometimes it is separate)
- a trade mark licence (rare these days to have to sign separately)
You should ask the franchisor what will be involved for the particular franchise, and ask to see all agreements that may be relevant. You should also bear in mind that the operating manual is almost always incorporated in to the legal agreement, but you will almost never be allowed to see it in advance and it can be updated at any time. You should also consider supply terms for anything that you have to buy from the franchisor or its nominated suppliers.
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