Franchise Agreement – Dangerous Contract Terms

Please note before reading this: this site cannot give legal advice, and is speaking on information only terms, inviting readers the directions to explore, and areas in which to advice.

Most people would advise you: Check ANYTHING you rely upon.

But that is the problem of course.

Ask a solicitor about a franchise agreement and the typical response will be – “It is a standard franchise contract, not unusually onerous weighted much in the franchisors favour”.

What NOBODY tells you is that for people more used to buying refrigerators, plumbers or even for those already in business, buying business services: The contract for franchises is VERY unusual compared to the contracts a consumer normally enters.

Look at a contract to buy a car, and the contract is broadly in line with the marketing materials, common law, and consumer statute goes a long way to protect you, so that If the car you receive is materially different from the one they describe, then you can take recourse against the seller.

With a franchise that just is not so.

You may not realise: All of the promises and positive spin, All of the marketing materials, and anything they tell you before hand are normally DELIBERATELY excluded from the contract, we explain how in the Franchise Secret.

What you think you are buying (And what most people assume a franchise is, the result of huge franchise industry marketing spend) is a proven system to make money.
But what you are actually buying is something very different.

A single clause of “weasel words” normally removes almost all of the franchises implied, but nowhere legally stated obligation to come up with a system to make money – and any comments they may make on the matter in the lead up to your purchase then can become incidental.

Strip away the obligation to provide a system for earning, and in many cases all that is left is franchisee obligations to pay the franchisor, buy goods only from him, and keep paying for a very long time with no avenue to escape even if you never make a cent.

Many of these contracts prevent any other means of earning for the franchisee, or other business interests, demanding full time regardless.

Too many franchisees who fail to earn a penny assume that is a fundamental breach of the contract and allows them to escape. Not so – the franchise can often still enforce it.

It is amazing to the author as a laymen, and serial business owner/franchisee that any solicitor can honestly do anything except condemn such agreements out of hand!! But they don’t.

It gets worse. Much worse.

If that was not bad enough – There are clauses even more damaging, clauses that cost both hapless franchisees and funding agencies millions. So bad that it distorts the entire lgoverment agency lending profile in countries as big as Canada.

Check out for these in your franchise agreement before signing. A Canadian judge very active in state franchise regulation called franchise agreements and contracts “masterpieces of deceptive wording”

You have been warned! Don’t buy a franchise until you have read the Franchise Balance which explains some of these clauses – and if you are not yet convinced to buy that, then sign up for the Franchise Secret serialized over a period of a week which explains some of this weasel wording!

Be careful. If in doubt don’t do it.