Franchise Agreements - a cautionary tale

Taking the franchise route is an excellent way of gaining experience in running a business and learning about an industry sector with a safety net. The support and guidance of an established brand is invaluable to a newcomer to business life.

There are many benefits, not the least the potential to make a very good living. Many franchisees make the choice when they become disillusioned with the corporate world and look for a change of direction but for those who have only worked in large organisations they sometimes find the constant multi-tasking can be equally challenging.

Anyone considering entering a franchise agreement needs to be absolutely sure of what they can and can’t do within the terms of the agreement and understand that there is no room for imaginative interpretation; the terms have to be strictly adhered to. The cautionary tale reported in the British press involving Mr. and Mrs. Jackson and their legal battle with Pirtek, the franchisor, which has left them bankrupt and homeless indicates how vital it is to fully understand the limitations and expectations of the Agreement.

Mr. Jackson’s troubles arose when his contract ended and during the course of an audit conducted by Pirtek it was discovered that he had been selling products other than those supplied by Pirtek in direct contravention of the Agreement. Mr. Jackson claimed that this was done only when he could not obtain the products from Pirtek and he did not think that the company would object. Franchisors across the board will not permit or tolerate this practice as it has the potential to damage the reputation of their brand and cause huge repercussions. Mr. Jackson did not have any realistic defence.

This case demonstrates the importance of not only reading the franchise agreements but the even greater importance of having the Agreement scrutinised a legal expert who will alert you to everything you should be aware of before signing the Agreement.

For more information about how our lawyers can assist with any matter involving franchise agreements or disputes, please contact our client services on +44 (0)20 7183 9482 or email us at: clientservices@giambronelaw.com