Franchising and licensing agreements
Franchising is the process by which one business (the franchisor) grants another business (the franchisee) a licence to set up their own business (a franchise) using the brand and format of the franchisor’s business.
Generally, the granting of a franchise will allow the franchisee to use the name and other branding of the franchisor and in return the franchisee will make periodical payments to the franchisor. In addition, the franchisor is able to exercise quality control over, and provides assistance to, the franchisee. To the consumer, the franchisee and franchisor are one and the same. The benefit of a franchise to the franchisee is that it acquires a ready-made business while the franchisor exercises quality control to ensure it’s brand is protected and receives regular payment.
While the granting of a franchise will often include a licence, a licence is more likely to be granted for the manufacturer of goods or the use of intellectual property as opposed to the whole-sale format of a business. A licence allows the licensor to exercise some quality control and limit the use of the licenced property in return for a fee.
As a franchisor or licensor it is crucial to ensure that you have clearly set out what has been franchised or licenced and how it can be used. A pre-existing franchise may include a commercially leased property and it is crucial to ensure that correct searches have been undertaken in respect of the property.
It is also important to clearly state the terms relating to payment of fees by the franchisee / licensee to the franchisor / licensor.
As a franchisee or licensee you need to ensure that you have obtained the rights you require and you are not unreasonably fettered in how you use them. You also need to ensure that the terms of the franchise or licence are not unusually onerous.
We are experienced in drafting agreements for the licence of software, branding and image rights. We advise franchisors and franchisees in relation to a variety of businesses including education, food and beverages and health and beauty.
If you are entering into a franchise or licence and you would like some advice and assistance call us on 020 7611 4848 or email us at email@example.com.