Franchise agreement key clauses UK: what to check before you sign

What to take away

Parties, territory and the grant

The first pages name the franchisor, the franchisee and the legal structure. Check the company number against Companies House before you rely on the brand's history.

The grant clause sets your territory and any exclusivity. Look for postcode or drive-time boundaries, online sales rights and whether the franchisor can appoint another operator nearby. Vague words such as "primary" or "core" territory need a map or schedule.

The brand licence should name the trade marks, know-how and limits on their use. If the agreement lets the franchisor change the brand without consent, treat that as a cost and control risk.

Other commercial contracts connected with a franchise purchase may also need separate legal review; see commercial contracts.

Clause comparison at a glance

Clause	What to check

| Initial fee and royalty | Check the amount or formula, sales base, due dates and audit rights. | | Marketing fund and technology fees | Check what each fee covers, how it can change and what notice is required. | | Grant and territory | Check the boundaries, exclusivity and the franchisor's rights to appoint others. | | Renewal | Check the conditions, notice deadline, fee and whether new terms can be imposed. | | Default, notice and cure | Check which breaches allow termination, how notice must be served and how long you have to remedy a breach. | | Assignment and post-termination restrictions | Check consent requirements, exit costs, de-branding duties and limits on working after termination. |

Fees, royalties and VAT

Royalty rates matter less than the sales base. Check whether VAT is included, how returns are filed and what audit rights the franchisor holds. A rate on VAT-inclusive sales is not the same as the same rate on net sales.

Marketing fees and technology fees often sit outside the royalty. Ask for a full schedule of every payment, including any minimum fee. Check when each fee can change and what notice applies. There is no standard statutory franchise royalty or minimum fee: check the amount or calculation in your agreement. Check HMRC's VAT registration rules and how VAT is accounted for.

Renewal, assignment and exit

Renewal clauses often give a right to renew only if payments and standards are up to date. Check the notice window, the renewal fee and whether the franchisor can offer new terms. If renewal is not guaranteed, plan your exit from day one.

Assignment clauses control whether you can sell the franchise. Many agreements require the franchisor's consent and a buyer who meets its criteria. Ask how the sale price is approved and what happens if consent is refused.

Termination rights usually list defaults, notice periods and cure rights. A short cure period can turn a minor reporting delay into a termination event. Check the exit fee, de-branding duties and restrictions on working in the same sector. There are no standard franchise notice windows, cure periods or exit fees, so verify the terms in your agreement. The warning signs in the disclosure document often reappear as one-sided renewal terms.

Termination rights and notice

Termination rights in UK franchise agreements often split into immediate termination and termination on notice. Immediate termination may apply to insolvency, abandonment or criminal conduct. Notice-based termination usually follows repeated breaches.

Check the cure period for each breach. A short cure period is tight for a VAT return query. Also check whether the franchisor can terminate on a change of control, a relocation or a failure to hit a sales target. Sales targets should be defined in the contract, not in a side email.

After termination, the agreement may stop you using the brand, contacting customers or operating a similar business. Under common-law restraint-of-trade principles, whether a restriction is enforceable depends on its scope and circumstances. The Competition Act 1998 may apply to agreements that restrict competition; the Unfair Contract Terms Act 1977 can govern certain exclusion or limitation clauses, rather than setting a standard non-compete rule. The Competition and Markets Authority publishes guidance on motor vehicle agreements, not a general rule for franchise restraints.

A short signing sequence

Common questions

Is a franchise agreement covered by UK consumer law?

Usually no. Franchisees normally buy as a business, so the Consumer Rights Act 2015 does not apply in the same way. The signed contract and general contract law govern.

What is the BFA code of practice?

The British Franchise Association (BFA) code is voluntary. It expects members to give prospective franchisees written pre-contract disclosure and sets standards for the franchise relationship and complaints or dispute resolution. Ask for the BFA disclosure document and check that it explains the franchisor, investment and recurring charges, support, franchise network, and relevant financial or legal information. Check the BFA's accredited franchisor register; the UK has no general statutory franchise disclosure regime.

Can I renew a franchise agreement in the UK?

Only if the contract gives you that right and you meet its conditions. Check notice deadlines, fees and any new terms.

What are my termination rights?

They depend on the clause. You may terminate for the franchisor's material breach or insolvency, but you need the notice and cure steps in the contract.