It is customary for the franchisee to carry out an “audit” of the franchise when the franchisee wishes to sell the business or simply extend the franchise for a different period. The audit can be financial or a business practices inspection to identify compliance issues. When they are found, the franchisee usually has the opportunity to correct them. As long as the issues are addressed, this should not endanger the franchisee, although this type of infringement has sometimes been used by franchisees to terminate franchise agreements. As part of your due diligence, always ask if a franchise is willing to negotiate the terms of the franchise agreement. At first, most of them will answer negatively, but you need to test it. Ask something like, “Do you think that if I literally only find one word in the whole agreement that should be changed, wouldn`t you even consider it?” If officials were to scoff and say that they are considering changing a single word, they are really saying, yes, the treaty is negotiable and you should have specialized support to negotiate accordingly. Like many other legal contracts, franchise agreements can have a lot of “Boilerplate” provisions, which can be confusing. These may include issues relating to ownership and transfer, consents and rights of refusal, and the protection of intellectual property which, even if understood by the franchisee, may not be fully recognized. In the second part of this article, I will dwell on this basis to discuss other considerations that might be less obvious, but are just as important to your understanding of the franchise agreement and the success of the franchise. It is essential that the agreement correctly identifies all aspects of the franchisee`s intellectual property and other proprietary rights and that they are duly protected and licensed with the franchisee. The contract should also focus on the specific needs and requirements of the franchise and take them into account and manage the relationships between the parties in a positive and constructive manner….
