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As a franchisee, buying a franchise is an exciting opportunity for those who’ve always wanted to start their own business.
However, running a business can be challenging – and it becomes even more complex when it comes to buying a franchise in today’s competitive 2025 market.
This is because there are certain rules and industry best practices that you must comply with, and these requirements are continually evolving.
These rules are also dependent on the franchising network you want to join, as well as updates in consumer and competition law. For more information on current legal obligations, you might want to check out our Industry Regulations Guide.
The starting point for buying and selling your own franchise is drafting a Franchise Agreement.
Here are the key things you need to know as a franchisee about a Franchise Agreement.
What Is A Franchise And What Do I Need?
A franchise is a type of business structure whereby the owner of a business (the franchisor) licenses others (the franchisee) to use the business’s trade name and operating model, along with proven systems and processes. This structure not only allows you to capitalise on an established brand but also to benefit from ongoing support.
If you’re considering becoming a franchisee in 2025, you will need:
- A Franchise Agreement
- An Operations Manual
- Other supporting legal documents and compliance certificates
While a lawyer can help with most of these documents, the most critical legal document you’ll need is a Franchise Agreement. For further guidance on legal necessities, you might also find our Legal Documents for Business page useful.
What Is A Franchise Agreement?
A Franchise Agreement is one of the essential documents that a franchisor (the person licensing the franchise) must provide to you, the franchisee (the person operating the franchised business). This agreement outlines the legal and operational framework under which you will operate the franchise.
The document typically delineates four main elements:
- Key terms of the business
- The franchisee’s obligations
- The franchisor’s obligations
- Procedures relevant to the transferring and operation of the franchise
Alongside these fundamental provisions, the Franchise Agreement will contain clauses that differ from a standard business sale agreement, reflecting the unique relationship and operational specifics of franchising.
It’s important to note that no two franchises are identical. Franchisors structure their agreements to align with their business models and strategic goals. This is why you might see tailored clauses that detail everything from territory exclusivity to supplier arrangements.
For example, our Franchise Agreement Review service can help you understand and negotiate these specific terms.
In New Zealand, the Fair Trading Act and guidelines from the Franchise Association of New Zealand (FANZ) provide up-to-date benchmarks and codes of practice for franchising. It’s crucial to ensure your Franchise Agreement aligns with these standards, especially with changes and updates effective for 2025.
Having a lawyer review your Franchise Agreement is essential, as there may be nuances specific to your circumstances that need addressing. Our Small Business Lawyer guidance can help you find the right support.
What’s The Difference Between A Franchise Agreement And A Licence?
You might easily become confused when distinguishing between a Franchise Agreement and a Franchise Licence. Generally, a Franchise Licence will authorise you to sell branded products under the franchisor’s name.
Conversely, a Franchise Agreement gives you the rights to establish and operate a franchised business, including accessing the company’s intellectual property, assets, suppliers, and operational know-how. As such, Franchise Agreements tend to be more comprehensive and, at times, more restrictive than simple licensing agreements.
Because with a Franchise Agreement you are essentially representing the entire franchise network, adherence to all associated franchise rules and regulations is mandatory. Understanding these differences is critical, as your obligations under each arrangement will differ significantly.
What Are The Main Franchise Agreement Provisions?
As a prospective franchisee in 2025, there are several key elements you should look out for in a Franchise Agreement:
Training and Support
The franchisor should provide you with comprehensive training and ongoing support, which may include administrative, technical, and operational assistance. Depending on the franchise, this training might vary, so ensure that the agreement clearly outlines what support you will receive.
Geographical Location & Exclusivity
The Franchise Agreement will specify your operational territory. It may also include exclusivity provisions, ensuring that no other franchisee within the network can operate in your designated area. This helps protect your market share and business potential.
Duration
Another critical provision is the duration of the agreement. Knowing the term of your franchise commitment will help you assess whether you can sustain the business over that period, and if the agreement offers options for renewal or exit.
Fees
The agreement should clearly detail all fees, including the initial franchise fee, ongoing royalties, and any other charges associated with using the franchisor’s brand and systems. For a detailed breakdown, you might want to review our insights on What Fees the Franchisee Has to Pay.
Renewal & Sale Rights
The agreement should also set out your rights regarding renewal and sale. This includes outlining the procedures if you wish to sell the franchise or terminate the agreement early. Some franchisors offer clear exit strategies, which can be extremely valuable if circumstances change.
What If I Want To End My Franchise Agreement?
If you’re considering ending your Franchise Agreement before the designated term, it is essential to have a well-drafted termination clause. This clause should clearly set out the circumstances under which the agreement can be suspended or terminated.
Typically, termination clauses provide for two outcomes:
- Suspension: The agreement is temporarily paused until the issues are resolved and both parties agree on a resumption date.
- Termination: The agreement is permanently ended, releasing both parties from further obligations.
Including a termination clause is in the best interests of both the franchisor and franchisee, as it provides a clear exit strategy if the relationship deteriorates. For additional details on how to manage exits, you might find our What To Do At The End Of A Franchise guide helpful.
Moreover, recent trends in franchising for 2025 emphasise the importance of digital compliance and cyber security measures within your agreement, ensuring both parties are protected in today’s increasingly digital marketplace.
Franchising Resources
Laws around franchising can be quite dense, and this area of law requires specialised legal expertise. We offer a range of resources to guide you through various stages of the franchising process, such as:
- Selling A Franchise
- What To Do At The End Of A Franchise
- Legal Documents You Need For Franchising
- What Fees The Franchisee Has To Pay
- Terminating A Franchise Agreement
- What To Do With A Bad Franchisee
- Franchisees’ Legal Obligations
- What Are Franchising Royalties
- Franchise Grant Process
What To Take Away…
As a franchisee, the process of buying, operating, and potentially selling a franchise can be complex and demanding. Ensuring your Franchise Agreement is detailed, up-to-date, and in line with current legal standards is paramount for your success.
Stay informed about the latest industry trends and seek expert legal advice to tailor your agreement to your specific needs. Our comprehensive resources and experienced team are here to help make your franchising journey as seamless as possible. For further insights on franchising legalities in 2025, check our Getting Started with Your Legals guide.
If you’re considering selling your franchise or are interested in purchasing one, don’t hesitate to give our team a call on 0800 002 184 or email us at [email protected] – we are here to help!
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