August 13, 2014

A Priority for Your To-Do List: Update Your Franchise Agreement

As a franchisor operating in Ontario, you should be quite comfortable by now with the need and discipline involved to keep your franchise disclosure document “evergreen” and ensuring it is site specific when handed out.

Often overlooked is the need to conduct a regular review of your form of franchise agreement. Franchise agreements have evolved over time just as businesses themselves have. For a simple example, a franchise agreement that does not address the respective parties’ social media rights is missing a fundamental term relating to marketing and advertising, maintenance of goodwill and trade-mark protection.

As importantly, as you and your system mature, so does your understanding of your business, your franchise model and opportunities to earn and potentially share in revenue streams. You gain experience in what issues arise in the operation of your system and in your relationships with your franchisees. You become more sophisticated in your understanding of the legal aspects of your business.

Drafting and updating your franchise agreement should never be an “off the shelf” exercise. Franchising is by definition the granting of legal rights. Your agreement is the foundation on which your system rests. It should be reviewed periodically with every bit of attention as your underlying business.

At Sotos LLP, our goal is to ensure that our franchisor clients’ agreements when first drafted and as continually updated maximize the opportunities for the success of our clients’ systems and businesses.