As franchise systems continue growing in complexity and sophistication, the age-old franchise agreement is starting to evolve. While in the past, franchise agreements have been viewed to benefit the franchisor, today’s agreements need to carry balanced benefits to both sides to be competitive. Brian Schnell, partner and franchise practice leader with Faegre Baker Daniels, discussed the nuances of the evolving franchise agreement in Multi-Unit Franchisee.
“One of the roles of the franchise agreement is to allow the franchisor to grow, protect, and evolve the brand and the brand’s stakeholders,” Schnell said. “If you have an agreement that’s so airtight as to win every franchise dispute, more and more franchisees, especially multi-unit franchisees, [will say] ‘I’m not going to sign this.’”
Schnell said that if a franchise agreement is too one-sided, “It’s likely not going to have enough balance for franchisees, in particular multi-unit franchisees, to get a return on their investment, to have the certainty that they’re looking for so they know what this relationship and journey and business will look like over the next five, 10 or more years.”