New Precedent Franchise Agreement – Warning One Size Seldom Fits All

The Auckland District Law Society has just announced that a precedent franchise agreement will shortly be available for the first time in New Zealand.

This will bring many franchisors to question whether they should use this document as the basis for their own franchise agreement or whether they should seek (at a cost) specialist franchise advice to get a completely tailor made document.

The precedent franchise agreement will surely assist those franchisors that don’t wish to instruct a franchise lawyer and it will definitely be a much better option than a franchisor trying to draft a franchise agreement itself (by pulling provisions from various other franchise agreements that the franchisor may have seen).

The concern however, is that one size does not fit all and the precedent franchise agreement will not necessarily fit all systems (especially the more complex or out of the ordinary systems). Indeed, we have in the past (when reviewing franchise agreements prepared by others) seen provisions which make absolutely no sense, when the business activities of the franchisor and its franchise system are reflected upon.  An example of this is a franchise agreement that we reviewed, which contained references to the franchisees “premises” when in fact the franchisee had no “premises” and instead operated the business from a mobile unit.

When we draft a franchise agreement, we prefer to get a full understanding about our client’s business and its system first (whether through a legal brief from a franchise consultant or otherwise) and then draft a franchise agreement based on that. The precedent franchise agreement, however, may result in the franchise agreement being written first and then being adapted to try and fit into a particular franchise system (which could create difficulties).

We strongly suggest that anyone considering franchising their business, see a lawyer specialising in franchising, so as to get a franchise agreement tailored directly to their individual business activities.

If you have any queries concerning the appropriateness of your franchise agreement in relation to your franchise system then please contact us.