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

Franchise 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:

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This article first appeared in Business Franchise Magazine

Jane Masih, franchise solicitor

Jane Masih

About The Author:

Jane Masih is one of the most experienced franchise solicitors practicing in the UK today. Appointed as head of Owen White’s Franchise team in 2002, Jane has been advising franchise clients for 31 years in the development of their franchise networks including drafting franchise agreements and master licence licences, acting in the sale and purchase of franchise businesses and advising franchisees on the acquisition of franchises. She regularly speaks on franchising topics, writes articles on various aspects of franchising and has been invited to judge the HSBC Franchisor and Franchisee of the Year Awards and the Franchise Marketing Awards on numerous occasions. Jane has served on the Board of the BFA and is a founding member of EWIF winning ‘Outstanding Contribution to Franchising’ in 2014

About Owen White:

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