In the excitement of embarking on a new franchise business, it’s easy to overlook the importance of the terms you’re being offered.

Yet the franchise agreement lays out all your obligations and rights, which if properly considered could make it easier for your business to succeed.

Conversely, signing up without advice is a big risk for any business to take. There are often clauses in the agreement which don’t hang together properly, are not standard, or that place you at a disadvantage.

Four key points in any franchise agreement

Get these right and your business is ahead from the start

Exclusivity = advantage

When you’re weighing up the opportunity, the extent of exclusivity you’re being offered can have a big impact on the business from access to customers and how close your competition could be.

These clauses are not identical from one agreement to the next. It’s important to know what exactly the terms grant you, and what the franchisor carves out from the exclusivity. We’ve seen a lot of these before and they can make or break a business.

Get everything in the agreement

If it’s not in the contract it doesn’t exist. That’s worth remembering. You shouldn’t make a commitment based on a conversation or a presentation backed up by verbal assurances from the franchisor.

An experienced eye can spot what’s missing and ensure that anything you have been told by the franchisor, which is important to your decision to go ahead, is reflected in the legal terms. More protection for you.

Think further ahead

It’s not always obvious, but you’ll be more successful if you’re thinking right from the start about how you plan to exit the business.

The contract’s terms here are key particularly over who owns the clients, what renewal rights exist, the consequences and process for sale or termination.

Knowing what’s on offer could influence your decision to go ahead, or might give you scope to have the terms changed to suit your needs better.

Don’t lose through liability

Although your franchise agreement might be through a company, there is usually a personal guarantee that will need to be made on your part.

You need to be clear on your individual liability if things don’t go to plan.

Seeking advice at this stage to clarify, and potentially mitigate, your personal exposure could save heartache and money in the future.

Any franchise contract is an opportunity to do a deal. For a fraction of the franchise fee ask our Franchise specialist, Amy Leite, to perform a review – she’ll make sure you fully understand the contract, the opportunities you have within it and any risks it hides.