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The complexities of franchise agreements do not end once franchisees sign them. As a franchisor, you must continually address various legal considerations to ensure the ongoing success of your franchise network. Maintaining vigilance in these areas can help safeguard your franchise business’s interests and foster mutually beneficial partnerships with your franchisees. This article will explain the ongoing legal considerations for franchisors throughout the franchise agreement.
1. Providing Support
As a franchisor, you must provide ongoing support to your franchisees. This support can include:
- further, supplementary training beyond the initial training program;
- marketing assistance;
- being available to provide general help and advice;
- updates on brand developments;
- troubleshooting advice; and
- seeking your franchisees’ feedback.
The franchise agreement you share with your franchisees will determine the form of support you must provide. Treating the support provision you outline in the franchise agreement as a bare minimum benchmark can benefit your franchise relationships. You can offer further, valuable support beyond this. Your support benefits your franchisees as you are the expert in your brand. Your support can help develop their business strategies, benefiting your network.
It is also crucial to remember that franchisees are independent business owners. They operate under your brand but are ultimately in charge of their locations. Be thoughtful and tread carefully with your support provisions to avoid being overbearing in your approach.
2. Potential Franchisee Breach
A franchisee might breach the terms of the franchise agreement at any point during its lifespan. You should continually monitor franchisees to ensure they meet performance expectations and adhere to the agreement. You can conduct audits and inspections periodically to ensure your franchisees adhere to your operational standards.
Some clauses might still be in effect for a period beyond the end of the franchise agreement. For example, one of which is a non-compete clause. Such clauses prevent a franchisee from engaging in business activities that directly compete with your franchise business and might still be in effect for several months following the end of the agreement. It is in the interest of your franchise network to ensure that existing and former franchisees remain aware of how they might breach the franchise agreement, including beyond the end of its term. This way, they may be less likely to act in a way that breaches the contract.
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3. Intellectual Property Protection
Beyond monitoring your franchisees’ performance and operational standards, you should also monitor the proper use of your trade marks and other intellectual property to safeguard against unauthorised use. Beyond monitoring franchisee use, you should also ensure your intellectual property registrations, such as trade marks and patents, are current and address any potential infringements promptly.
4. Marketing and Advertising Contributions
By providing marketing assistance and monitoring franchisees’ marketing strategies, you can ensure that your franchisees follow the marketing and advertising processes you agreed upon.
Moreover, you might regularly collect a franchise marketing fee throughout the franchise agreement alongside ongoing royalties. As part of your responsibilities, you should ensure that you use this marketing fee for marketing and advertising purposes. It can also be beneficial to report marketing fund spending to your franchisees.
5. Dispute Resolution Procedures
A dispute can arise between you and your franchisees at any point throughout a franchise agreement. Should this happen, it is crucial to rely on dispute resolution procedures. You will set these out in your franchise agreement and operations manual. You should also highlight the importance of this mechanism to your franchisees so they know to follow it should they wish to raise a concern.
The dispute resolution procedures should be clear and accessible. When a potential dispute arises, you should prioritise maintaining open lines of communication with the franchisee to address issues before they escalate.
This handbook covers all the essential topics you need to know about franchising your business.
Key Takeaways
Throughout the franchise agreement, you must consider several ongoing legal considerations. One of which is your obligation to provide ongoing support to your franchisees. You must meet and potentially attempt to exceed the support provisions set out in your franchise agreements.
Another important legal consideration throughout the franchise agreement is monitoring your franchisees’ performance and reviewing any potential breaches of the agreement’s terms. This consideration may also extend beyond the end of the franchise agreement if you stipulate a non-compete clause that lasts for some time following its natural end or termination, for example.
Additional responsibilities include:
- properly managing the marketing fund and safeguarding your intellectual property rights; and
- having clear and accessible dispute resolution procedures.
By managing these ongoing legal considerations, you can build a solid relationship that benefits you, your franchisees, and your franchise system.
If you require assistance with your franchise and ongoing legal considerations, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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