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Understanding the Franchise Agreement: Standardized designs and plans

bigstock-122171948By Peter Snell
Over the next several issues of Canadian Business Franchise, this column will continue to explore different aspects of franchise agreements, to give you a better understanding of their basic elements. In this issue, we will explore the requirement that most franchisors insist upon for franchisees to use standard plans for the construction and development of their franchises’ locations.

Please note it is extremely important for you to take the time to fully analyze and review any franchise agreement, disclosure document and respective attachments before you sign them. While the following information may serve as a general overview, as always, you should also seek your own professional legal advice when reviewing a franchise agreement. Only then can you obtain specific information and recommendations relevant to your particular circumstances.

Clauses where applicable
You can certainly expect to find clauses within your new franchise agreement that (a) require your franchised location’s premises to be constructed and developed 
in accordance with the franchisor’s standard plans and (b) prohibit any variations being made to them without the franchisor’s prior written consent.

This, of course, is assuming that the franchised business you are buying requires physical premises (e.g. a retail location) at all. Today, of course, many franchises are instead operated out of the franchisee’s home and/or as a mobile business.

This is also assuming you as the franchisee are going to be responsible for the buildout of your franchise’s location. Such is not always the case, as many franchisors instead sell franchises they have already developed as ‘turnkey’ locations. In these situations, the franchisor is responsible for the buildout of the franchised location, although the franchisee is typically responsible for all of the costs associated with the buildout; and once construction of the location is completed, the franchisor turns over the keys to the franchisee to operate the new business.

For franchisees who are already operating and have been asked by the franchisor to undergo a ‘brand refresh’ and/or perform upgrades on their location—which is often the case when the lease or franchise agreement is up for renewal, typically every five years—the same rules will apply, in that the premises must be renovated or redeveloped in accordance with the franchisor’s plans. Such is also the case in the event the franchised business is relocated to a new area.

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