When Franchise Agreements Create Buyers Remorse

Agreement

Lord Frost signed the Northern Ireland protocol as part of Brexit. But now has decided that it wasn’t a good idea and would like the EU to amend it. The EU aren’t overly keen. Obviously. What about you Mr Franchisor, what would you do?

Franchise Agreements are in my view quite lengthy given the simple nature of franchising. When a franchisee signs an agreement and then later regrets it perhaps everyone should just make changes, find a way to make it fit and stay as besties thereafter? Sadly that’s not how it goes.

I suspect, but I may be wrong, that Lord Frost has had reason to hold a few people to contracts over the years. By their very nature written agreements are designed to set out in black and white what is agreed. Then everyone complies. Lord Frost has argued that the contract was signed in haste. If so then some would say that a cooling off period should have been agreed. Many others would say, including me that the opinions of people you trust should have been obtained before diving in. Look before you leap as Aesop said.

In franchise agreements there is often a clause that allows the contract to be terminated if a franchisee doesn’t pass their initial training, or if they don’t commence the business ( the same thing in many cases). That allows a franchisor to back out. No such privileges are usually on offer for the franchisee. But escape routes can be installed including partial refunds of the franchise fee after signing. Franchise Agreements have never been drawn up as a balanced contract though, so don’t expect that. It’s not “gonna appen” as they say in the North Yorkshire village where I live. Naturally franchise agreements favour the franchisor. They have to favour the franchisor.

Don’t think though that this is a bad thing. If I was a franchisee I’d genuinely want the franchisor to have the whip hand. Not because of what it means to me, but because of what it means to the others in the network. A Franchisors power allows them to keep standards high and to deal with rogue franchisees. This is an important paragraph because a rogue franchisee will affect your business quite a lot. One day you’re happily going about your business and then the next day a viral complaint spreads to thousands of customers from a single click, and no one likes you anymore. Just like that, the actions of one franchisee in the network might ruin your business.

When Gerald Ratner, the now infamous boss of over 330 jewellery retailers famously said one of his products were crap the entire business tanked. The thousands of young romeo’s who relied on a Ratner gift to impress their new girlfriend deserted the shops knowing full well that crap earrings wouldn’t help in their pursuit of bedroom glory. Within days £500 million was wiped from its share value and the group ended up doing a phoenix!

One careless sentence was the death sentence of an entire company. So bear in mind who your franchisor is too, check their backgrounds, there’s no comfort for you in having a maverick egomaniac or previously convicted fraudster as your franchisor. It’ll come out at some point and it’ll affect your franchise. Just a matter of time….

So the message here is two fold for aspiring franchise owners. With the Agreement, firstly, take your time and understand what you’re signing, there is never a need to rush, and if you are rushed then walk away. Always walk away if you’re rushed. Always. Don’t do a Lord Frost and rush into it.

Secondly understand and accept why Franchisors need the balance of power. If your neighbouring franchise is being an idiot you want your franchisor to have the power to deal with it. Don’t you? Of course you do!

Fully understanding this means that when you sign up, you can just then get on with growing the business and focus on that. Which I suspect is what most of us want to do anyway.


Andy Cheetham

Andy Cheetham is the founder and Managing Director of franchise consultancy firm Lime Licensing Group