5. Development of legal tools

Development of franchise legal documents is one of the final steps in building a franchisor’s business. If you have successfully completed all previous stages of franchisor’s business creation there is almost nothing new you will need to invent during development of legal tools. Your major task will be to “translate” all strategic decisions and franchise provisions into legal language and top it up with some common legal clauses.

In franchise agreement, besides specific provisions related to your business model, you will need to address some common issues:
 

  • Rights and obligations of franchisee and franchisor.
  • Fees.
  • Intellectual property.
  • Taxation.
  • Competition.
  • Liability of franchisee and franchisor.
  • Terms and termination of the agreement.
     

The complexity of franchising legal environment varies quite vastly in different countries. In European Union countries, for example, the laws directly regulating franchising usually are short, clear and comprehensible and leave the majority of the franchisee-franchisor arrangements to themselves. On a contrary, in the USA franchising is regulated quite heavily and there is a lot of legal work that must be done by franchisor both prior and during its business operations. Therefore, you must investigate the franchising legal environment in each of your target development countries and develop franchise legal documents in accordingly. 

You might hear a common misconception, that the franchise agreement is the only thing necessary for starting a franchisor’s business. You might also face another “urban myth”, that lawyers can develop a franchise agreement by simply adjusting uniform template a little. Both of these statements are false. Franchise contact cannot replace franchisor’s business strategy or franchise concept. At the same time franchise contract is too important to use templates and leave it just to lawyers. Although it is quite common and even advisable to hire professional lawyers to help you out in development of strong legal documents, however, the main job of defining contract provisions will be yours. When hiring legal councilors you should expect them to:
 

  • Dress your management decisions into legal attire;
  • Indicate weaknesses and potential threats related to your franchise provisions;
  • Suggest improvements that would prevent you from unnecessary risk or help you to mitigate it;
  • Ensure that franchise legal documents meet official requirements in all jurisdictions you are going to develop your franchise network.
     

To summarize, it is important to bear in mind that owing to their complex and composite nature, contracts of this kind are often unique and that the peculiarities of each individual case can lead to varying legal relationships existing between franchisee, franchisor and third parties.

After completing franchise agreement, you are ready to take last steps of franchisor’s business creation – settle franchise marketing and franchisee recruitment matters. You can read more about preparation for franchise marketing here >>>>

 

  • Check our presentation about creating a franchisor's business here >>>>
  • Download the e-book “Franchisor's business: the beginning” here >>>> 
  • If you have any question, fell free to contact us here >>>>

 

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