Should I get a franchise agreement reviewed before signing?

Yes. Franchise agreements are long, drafted by the franchisor and often hard to change after signing. A review explains your obligations, the costs, the restrictions and any personal guarantee before you commit.

What does a personal guarantee in a franchise agreement mean?

That you personally promise to meet the franchise company's obligations if it cannot. Your own assets, potentially including your home, could be at risk. It is worth trying to limit it by amount or time, or to have it released if you sell.

Can a franchise agreement be negotiated?

Franchisors often say their terms are standard, but some points, such as the personal guarantee, territory or exit terms, can sometimes be adjusted. It is easier to ask before signing than afterwards.

Franchise agreement review for a prospective franchisee: the agreement and the personal guarantee

A prospective franchisee given a long agreement with a personal guarantee in the schedule, and a plain-English report and call before signing

By Malcolm Zoppi20 September 2024Other

Key facts

Deal type: Commercial contracts
Acting for: Prospective franchisee
Business: Franchise business
Sector: Other
Deal value: Under £100k
Structure: Review of the franchise agreement and personal guarantee; written report and follow-up call
Timescale: Fixed-fee review
Completed: Completed
Lead solicitor: Malcolm Zoppi

At a glance

A prospective franchisee was given a long and complex franchise agreement, with a personal guarantee in the schedule. Before signing, they wanted to know exactly what they were committing to and how far they would be personally liable. We reviewed the agreement and the guarantee, set out the findings in a short plain-English report and went through it with the client on a call.

The client and the objective

Franchise agreements are usually written by the franchisor and weighted in its favour. The client wanted to understand the commitments, the risks and the extent of the personal guarantee, so they could decide whether to go ahead.

The work

A review of the franchise agreement and the personal guarantee.
A concise written report highlighting the points of concern.
A call to talk through the report and answer questions.

Key legal issues and how we dealt with them

The personal guarantee

A personal guarantee means the franchisee's own assets are at risk if the franchise business cannot pay. Because it sat in a schedule rather than the main agreement, it was easy to overlook. The report explained what it covered and how long it would last.

Turning a long contract into a decision

A franchisee does not need a clause-by-clause commentary; they need to know what matters. The report focused on the red flags and the practical consequences, so the client could weigh up the opportunity.

Talking it through

A report only helps if it is understood. The follow-up call let the client ask questions and check their understanding before deciding.

Outcome

The client understood their obligations and personal exposure and was able to make an informed decision about the franchise.

What this deal shows

Read the schedules; personal guarantees are often found there.
A short report on the points that matter is more useful than a long commentary.
Take advice before signing, while there is still room to negotiate.

“The client did not need a commentary on every clause. They needed to know what they were signing and what it could cost them.”
Malcolm Zoppi

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Frequently asked questions

: Yes. Franchise agreements are long, drafted by the franchisor and often hard to change after signing. A review explains your obligations, the costs, the restrictions and any personal guarantee before you commit.
: That you personally promise to meet the franchise company's obligations if it cannot. Your own assets, potentially including your home, could be at risk. It is worth trying to limit it by amount or time, or to have it released if you sell.
: Franchisors often say their terms are standard, but some points, such as the personal guarantee, territory or exit terms, can sometimes be adjusted. It is easier to ask before signing than afterwards.

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