Reasons for the Report
It is highly advisable for you to get a detailed report on the risks and obligations under the franchise agreement so that you enter the franchise knowing the legal obligations and risks for you.
Know What You Are Signing
Many franchise agreements are non-negotiable and will not be changed for you. This is usually so that there is consistency in the network and so that franchisees are on a level playing-field. You may therefore wonder what the point is of getting a report on the content of the agreement, given that you have no choice other than to sign it if you want the franchise.
However, by analogy, when buying a house most sensible buyers get a survey done before committing. The survey does not change the condition of the house, but it does mean that you buy the house knowing what condition it is in and what you are taking on.
In a similar way, even if you can not negotiate or change the franchise legal agreement, you should be sure that you know what you are signing and what the particular risks are. It is also vital that you understand if there is anything unusual or particularly high risk specific to the franchise agreement that you are being asked to sign.
If you are borrowing money to buy your franchise, the bank or lender may require you to get a report on the franchise agreement from a franchise specialist.
Other Considerations
A detailed report, such as the ones from EXB, will explain the meaning of most clauses in the agreement, and will point out the risks for you. In addition, the report should point out which risks are standard in franchising and highlight any unusual or particularly unfavourable clauses. The report should also take into account any concerns that you have raised or circumstances particular to you.
It is inadvisable, even if you can obtain one, to rely on a report prepared for another franchisee. The report will have been specific to their circumstances, the agreement may have changed since the date of the report, and passing on the report prepared for one franchisee is a breach of copyright.
Your report should be used as part of your assessment of the franchise and as part of the decision-making process on whether to go ahead. However, it is only one element of your decision, and you should also focus on the commercial and financial aspects of the business.
Although most agreements are non-negotiable, you should always raise any issues that concern you with the franchisor. Some agreements, particularly from a new franchise network, may be negotiable or you may be able to get a side-letter agreement to vary the franchise agreement for you.