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Always have a franchise agreement reviewed by a lawyer before signing. The terms are complex and often strongly determine what the franchisee is and is not allowed to do. Moreover, since the Franchise Act, statutory protection rules apply that must be accurately reflected in the agreement.
What does a franchise agreement regulate?
With franchising, the franchisee exploits a proven formula, brand name, and know-how of the franchisor. The agreement stipulates what the franchisee may do with those rights: for example, he may not simply use a different name or deviate from the communication and formula guidelines. The rights of the franchisee are often strictly limited.
The Franchise Act
Since the introduction of the Franchise Act, mandatory protective rules apply to the franchisee. Examples include a pre-contractual duty to provide information (the franchisor must provide information in a timely manner before signing), a right of consent regarding significant changes, a provision for goodwill, and limits on a non-compete clause after termination. An agreement that violates these provisions will not hold up on those points.
Why check?
Precisely because of its unique characteristics and legal regulations, a franchise agreement is difficult to understand. A review reveals whether the agreement complies with the Franchise Act, where the terms work to your disadvantage, and what you can have adjusted before committing yourself for years.
For both franchisee and franchisor
If you are a franchisee, you want to know what you are committing to. If you are a franchisor, you want your agreement to comply with the Franchise Act and protect your formula. In both cases, a legal review pays off.
Frequently Asked Questions
Do I need to have a franchise agreement reviewed?
Highly recommended: the agreements are complex, often apply for years, and must comply with the mandatory Franchise Act.
What does the Franchise Act protect?
Including, among other things, a pre-contractual duty to provide information, a right of consent regarding amendments, a goodwill arrangement, and limits on non-competition after termination.
Does this also apply to the franchisor?
Yes. The franchisor also has an interest in ensuring that the agreement complies with the law and adequately protects the formula.
Want to have your franchise agreement reviewed?
Our legal experts review or draft your franchise agreement in compliance with the Franchise Act. View our franchiseteam or schedule a free consultation.
