Franchise and Distribution Agreements

Below you will find some background information on the legal facts surrounding this area of the law, to help you get an idea of your options.

Legal Facts…

• Franchise Agreements– The essence of a franchise agreement is that the owner of a uniform business model (“the franchisor”) authorises someone else to use that model (“the franchisee”). Fast food outlets are a common example but any business model which can be reduced to a standard blue print is capable of being franchised. In practical terms franchising is a marketing exercise, the aim of which is that consumers perceive no difference between outlets run personally by the franchisor and one run by the franchisee. Franchises present the opportunity for the franchisor to earn a reward (the initial franchise fee and ongoing service fees) and for the franchisee to earn an income using a tried and tested brand. However, there are potential disadvantages to both parties from a franchise arrangement and professional advice is essential to understand the key legal issues. 

• Distribution Agreements – The basis of a distribution agreement is that one party (the distributor) buys goods from the other (the supplier) to distribute i.e. resell them to its own customers. The supplier, which could be the manufacturer of the goods or someone who has bought from the manufacturer the exclusive right to supply the goods, will have no direct relationship with the distributor’s customers. The distributor is an independent party who will bear the full risk in all transactions with its customers. Distribution agreements can be very complex and legal advice is vital to protect your interests whether as supplier or distributor.