Franchising is a popular way to grow a business or start one under an established brand using information, assets and guidance provided.  Whether you’re a franchisor expanding your network or a franchisee buying into a proven model, the franchise agreement is the governing document that is the cornerstone of the relationship. It’s a legally binding contract that sets out the rights, responsibilities, expectations and causes of action of both parties.

What Is a Franchise Agreement?

A franchise agreement is a formal contract between a franchisor (the brand owner) and a franchisee (the person or business buying into the brand). It gives the franchisee the right to operate a business using the franchisor’s name, systems, and support—usually in exchange for fees and royalties (typically an initial set fee, followed by a proportion of income).

The agreement typically covers:

  • Territory rights – where the franchisee can operate
  • Fees and payments – including upfront costs, royalties, and marketing contributions
  • Use of intellectual property – such as trademarks, branding, and proprietary systems
  • Training and support – what the franchisor will provide
  • Operational standards – rules the franchisee must follow
  • Duration and renewal – how long the agreement lasts and how it can be extended, and any criteria that must be met before this can take place.
  • Exit terms – what happens if either party wants to end the relationship

Legal Considerations in Franchise Agreements

Franchise agreements are not regulated by a specific UK statute. Instead, they fall under general contract law, intellectual property law, and competition law. This means the quality and clarity of the agreement are crucial.

Key legal issues include:

1. Intellectual Property Protection

The franchisor must clearly define how the franchisee can use trademarks, logos, and proprietary systems. These rights must be protected to maintain brand integrity. This can be done by way of a Trademark licence, granted for an amount of time equal to the length of the franchise agreement.

2. Territorial Exclusivity

The agreement should specify whether the franchisee has exclusive rights to operate in a certain area. Poorly defined territories can lead to disputes, especially if the brand grows, leading to more than one franchisee operating in an area, leading to competition between franchisees (which could erode the brand)

3. Restrictive Covenants

These clauses may prevent the franchisee from competing with the franchisor or poaching customers/employees after the agreement ends. They must be reasonable and go no further than is necessary. If they are challenged, and the courts find they are overly restrictive, then they may be found unenforceable.

4. Termination and Exit

The agreement should outline how either party can exit—whether through expiry, sale, or breach. Without clear terms, disputes can arise, which can lead to large costs, time and stress in negotiating/contesting.

5. Compliance and Licensing

Depending on the industry, franchisees may need specific licences (e.g. food hygiene, alcohol, or data protection compliance under GDPR)

How We Can Help Franchising Businesses

Whether you’re a franchisor or franchisee, we can assist in making sure your franchise agreement is legally sound and commercially fair. We take an active involvement in understanding your Company and use this understanding to ensure we trying understand your goals.

For Franchisors:

  • Drafting and reviewing franchise agreements
  • Advising on intellectual property protection
  • Ensuring compliance with industry regulations
  • Resolving disputes with franchisees
  • Supporting expansion or sale of the franchise network
  • How to best ensure the continuation of the Franchise Agreement once the initial term expires

For Franchisees:

  • Reviewing the franchising agreement before signing
  • Explaining your rights and obligations
  • Negotiating unfair or unclear terms
  • Advising on exit strategies or disputes
  • Protecting you from restrictive covenants that may limit future business activity

A franchise agreement is more than just a contract—it’s the foundation of a long-term business relationship. Getting it right from the start is essential. Whether you’re buying into a franchise or building one, legal advice ensures you’re protected, informed, and set up for success.

Talk to our team

Ashton Carter in our Corporate & Commercial team at Fisher Jones Greenwood LLP, is here to guide you through every step of franchising your business. For further information or to discuss your specific situation, please do not hesitate to contact our team using our online contact form or call 08081 891 596.