You should expect to follow a system. The point of buying a franchise is that you do not need to reinvent the wheel. Someone else has already established a business and has proven that it works and can be successful if you run it in a particular way. This means following instructions of the franchisor. This does not mean that success is guaranteed – this is not the case. Success will be dependent on the effort you put in and your ability to follow the manual. In addition, you will be expected to pay a fee and to sign a franchise agreement which will contain restrictions on what you can and cannot do. When you buy a franchise, you are essentially paying for the benefit of “renting” a business system for a period of time. Although it will be your business, it will be your business for a specified period of time only. Once this period expires, you will typically have the option either to carry on (subject to conditions) or to exit. When you exit, you should expect, to be subject to certain restrictions – usually, you would not be able to continue in there same or competing business for at least 12 months.
The franchisor is likely to ask you to sign a confidentiality agreement or a deposit agreement. This is standard since the franchisor is unlikely to start sharing any information with you unless they know that (a) you are serious about the opportunity and (b) you will keep the information confidential and not misuse it.
The franchisor may ask you to pay a deposit. Again, this is standard because the franchisor would not want to reserve a territory and grant you exclusivity without the security of a deposit. The deposit should be refundable although the franchisor is typically entitled to deduct any costs that they may have incurred in the event that you withdraw.
Finally, you can expect to be issued with the franchisor’s standard franchise agreement to enable you to obtain legal advice. Additional point to note, is that even if you intent to operate your franchised business through a limited company, the franchisor is likely to ask you for a personal guarantee and this is entirely standard and because your limited company is a separate legal entity. The purpose of the guarantee is two-fold – (1) to guarantee that your limited company performs its obligations and (2) to guarantee payments.
