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Ask the Experts: What is franchising?

Q: I am about to review my first franchise agreement. Are there any areas to which I should pay special attention?

Martin says:
First of all, you should never attempt to interpret a franchise agreement without seeking help from an experienced franchise lawyer who can help you detect and avoid potential problems. That said, while each franchise agreement is different, here are some points that deserve added scrutiny:

  • Your rights to sell or transfer franchise ownership;
  • Your rights to renew or extend the contract beyond its original term;
  • ‘Just cause’ provisions under which the franchisor can terminate your agreement;
  • Terms and conditions under which you can terminate the contract;
  • Geographical area and types of businesses/customers to whom you can sell;
  • Details about your exclusive territory;
  • Precise definitions of price, commissions, rental fees and leases required to own and operate the franchise;
  • The nature and extent of your obligations to buy supplies and materials from the franchisor or franchisor-approved suppliers;
  • The franchisor’s rights to assign unpaid portions of the initial franchise fee to financial institutions or other parties;
  • Descriptions of the exact training and support services provided by the franchisor; and
  • A description of the rights of your heirs and assignees in the event of your death.

Martin Greenspon is president of M-Four International, a franchise marketing, licensing and development firm based in Nun’s Island, Que. He can be reached via e-mail at info@mfourintl.com or at (514) 765-9604.

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