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Q&A: Can my franchisor change my royalty payments?

Q: “Can the franchisor change the fixed payment or royalty/percentage structure to suit them at any given time? How am I supported by the franchise agreement in order to yield a decent return?”

Specialist franchise lawyer

It would be a very strange franchise agreement that allowed the franchisor to make such fundamental changes during the initial term of the agreement. It is always sensible to ask a lawyer, experienced in reviewing franchise agreements, to check that the agreement does not contain any unusual provisions that would give the franchisor the right to make such changes.

Franchise agreement renewal

However, it is worth noting that the provisions enabling a franchisee to renew the agreement at the end of the initial term often contain a clause stating that the franchisor is not obliged to offer identical terms on renewal, and that the financial terms may be different at the time the franchisee seeks to renew the licence.

New terms for all not just one

The agreement should provide that the renewal terms will be the same as those offered to new franchisees, so that a franchisee has the comfort that any change in terms will be the same as those offered to other franchisees at the time of renewal.

Further reading:

If you require any legal advice on the purchase of a franchise or a franchise dispute, please contact the Franchising team.

This article first appeared in Business Franchise Magazine

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