Fiona Boswell

Senior Associate, Head of Franchising and Commercial Services

Franchising


Execute your Franchise Agreement correctly- tips for both the franchisor and franchisee

Fiona Boswell

Having been a long and sometimes arduous process, you have managed to successfully negotiate the terms of your Franchise Agreement! However if it has not been executed (signed) correctly it could potentially mean it’s invalid and unenforceable. Ensuring it’s correctly executed whilst it might not feel like it, is the most vital part of entering into any Franchise Agreement. 

Here are some practical tips to ensure you do not fall foul: 

  • There are two forms of a contract in law, a simple contract and a deed. A deed requires further formalities compared to just a simple signature from both parties in a simple contract. Also claims for breach under a simple contract can be for up to six years from the date of the breach, this extends to 12 years if the contract was signed as a deed.  
  • Deeds must be in writing, be clear ‘on the face’  that it is intended to take effect as a deed and delivered as a deed (i.e. which means that the parties intend to be bound by it). 
  • A deed generally must be executed in the presence of a witness. A party to a deed can’t be a witness also. The witness must be present and seeing the document being signed. Present legislation doesn’t prevent your spouse, civil partner or cohabitee from acting as a witness. It is best practice however that the witness is independent to show unbiased evidence of what they are witnessing being signed and by whom. It is also advisable that the witness is no younger than 18.   
  • There is statutory presumption that a deed executed by a company is deemed to be delivered on execution. However this presumption can be negated by using specific wording such as “this deed is delivered on the date written at the start of this deed”. 
  • As a franchisor it is crucial to ensure that the terms of the franchise agreement you have with your franchisees’ remain the same. This is key to ensuring uniformity and parity to all franchisees to avoid any disputes if a franchisee raises that they have unfavourable terms to their peers. Any changes to the franchise agreement should be addressed in a ‘side letter’ which should also be executed as a deed and signed at the same time as the franchise agreement to ensure the variation of the terms of the franchise agreement have been incorporated.  
  • If the parties are not able to sign the documents in the presence of each other, they can be signed in ‘counterpart’. So each respective party sign a separate but identical copy. Together, the various signed copies will form a complete executed agreement. It is good practice to include a clause within the contract specifically providing for the deed to be executed in this way. 
  • As technology has evolved, it has become more common practice to sign an agreement by an ‘electronic signature’ as opposed to a ‘wet ink’ signature. An electronic signature can take a variety of forms, which include a scanned image of the signature to a digital signature. To be effective, the electronic signature must demonstrate that you intend to be bound by the terms you have signed to. Problems will arise however, when the agreement is by a deed and so needs to be witnessed. There is presently no authority on whether requirement for the maker of the deed and the witness to be present together may be satisfied by virtual means, such as video link. Best practice is for documents of this type to be executed in paper form using a traditional wet-ink signature. 
  • Once you have a complete executed agreement signed by both yourself and the other party, ensure it is stored in a safe and secure place. This is in the event a dispute arises you have a copy at hand to check through what had been agreed!   
Word to the wise  
It’s extremely important to get this right first time, as any mistakes can have serious repercussions and at the very least can cause delays if the agreements require re-signing which can also incur additional costs.  

The Fraser Brown Franchise Team is able to assist whether you are a franchisor or franchisee through the entire franchise process from reviewing the franchise agreements, drafting and negotiating side letters, dealing with disputes that can arise, exiting a franchise agreement, signature guidance, agreement storage and also key date reminders for when the agreement is up for renewal.   

For any further guidance on this matter, please feel free to contact me at kmistry@fraserbrown.com or alternatively 0115 9888777. 

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