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What you need to know about how often you should review your franchise agreement.

Your franchise agreement is now two years old, or five or even ten years old … or is even older than that.

When and how often does it need to be reviewed and updated?

While there is no specific rule, the following are some of the key moments when you should read your agreement over carefully and make the necessary changes to ensure that it is still relevant and continues to provide proper protection for your rights:

  1. When adding, removing or making changes to the services you provide to your franchisees, or the manner in which you provide them;
  2. When any significant change is made to the services or products offered by your network;
  3. When any significant technological change occurs or is anticipated in your network (in particular, relating to the website, ecommerce, and your social media presence);
  4. When there is any change in the legislation or regulations governing your or your franchisees’ business (and your franchise lawyer should keep you informed about this);
  5. When any change is made to your names, brand names, trademarks, logos or slogans;
  6. When any situation arises where your agreement does not seem to provide an adequate answer;
  7. When a disagreement or dispute arises with a franchisee concerning the interpretation or application of your agreement. However, it is wise to consult your franchise lawyer before making any change as a result of a disagreement or dispute with a franchisee, since it can be preferable to wait until the disagreement is resolved or the dispute is over before making any change to your agreement; and
  8. When a judgment is rendered and could have an impact on your agreement or your relations with your franchisees (and your franchise lawyer should also keep you informed about this).

Even apart from those circumstances, you should read your agreement over carefully at least once every two or three years, and also have your franchise lawyer read it over.

Three practical tips

  1.  It is important that you read over your agreement yourselves from time to time. This is necessary to ensure that the clauses still properly reflect the way you do things, your procedures and rules in effect (which your franchise lawyer cannot know);
  2. If you are having problems properly understanding a clause in your own agreement, you should probably review it with your franchise lawyer. If it is not clear to you, it will be even less clear to a franchisee and the franchisee’s legal advisor … or, even worse, to a judge;
  3. One of the major benefits of dealing with a lawyer for whom franchising is a significant component of his or her professional practice is that the lawyer will be able to keep you promptly informed about developments in the legislation, regulations and case law that may have an impact on your franchise agreement or on your rights, responsibilities and obligations. These developments might not come to the attention of lawyers for whom franchising does not account for a significant share of their practice.

Source: Lexology

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