Franchise agreement renewal - added fees

Good_Old_Bakes

My wife has operated a pet sitting franchise for 5 years now. When she initially signed up for the franchise, she did so during an offer period where it was stated that there would be no monthly fees or royalties to pay on top of the £6,000 to buy into the franchise. This was stated in the original 5 year contract agreement.

The agreement is now up for renewal but the new franchisor is asking for monthly fees to be paid which we don't agree with. My wife only signed up because of the initial offer of 'no monthly fees' and certainly wouldn't have paid that sort of money up front as well as paying regular fees.

Is there any room to try and negotiate on this or can franchisors just rip up the initial agreements after 5 years and start again? What if we stick to our guns and insist on not paying fees? Will the franchise be terminated and will it be possible to try and recoup some of the initial fee?

Any advice greatly appreciated. Thanks,

patman99

Have you read the initial contract that you signed ?. Is there any mention of a time period the franchise runs for ?.
Are there any clauses in the T&Cs that allow them to introduce fees?.

Under English Contract Law, once signed, a contract cannot be altered or amended (except by Act of Parliament), so unless there are clauses stating such things as 'We reserve the right to alter the T & Cs', then they could be on a sticky wicket if they try to introduce monthly fees.

Mind you, when you think about it, if their only income is from people buying franchises, then they will soon run out of cash & the work would dry up. I am guessing that they handle advertising & run a central website. All of which costs money.
Your spouse has few choices. She could stick to her guns and (depending on the wording of the initial franchise contract) tell them to stick the fees. In which case I guess work would rapidly dry-up, or she could pay the fees & allow the franchisor to have cash to advertise & bring in new clients.

If your o/h went it alone, just think how much cash she would have to spend-out each month just to keep her name 'out there' in order to attract clients & generate an income.

Good_Old_Bakes

Thanks patman. The agreement runs for 5 years and it's up for renewal in May. Apart from saying that, there's nothing saying that fees could be introduced after a period of time. I don't know much about franchise or contract law but it seems unreasonable to me to suddenly start asking for extra payment.

With the benefit of hindsight, she would have been much better going it alone from the off instead of buying into a franchise but hindsight's a wonderful thing, isn't it?

paddyrg

Could she surrender the franchise and go solo now (charging less I'd expect)?

Or negotiate with the franchisor if she can pay a reduced royalty - every contract will be individual. Or pay more but for an exclusive territory, get something extra in return

However, if the franchisor is generating all the business, it could be an expensive exit.

Mistral001

This is confusing. The "offer period" seems to be for the whole period of the contract ie five years. Legal advice is perhaps required here to study the contract carefully.

patman99

As the initial franchise was for 5 years, then they can introduce whatever new T&Cs they wish (including fees) when you renew. You will be purchasing another 5 years-worth of their advertising and will probably find in 5 years time that they have changed things again.

You have not mentioned the costs of the fees, so we are not in a position to tell you if it is a good deal still, or whether you would be better off going it alone (if there are no restrictions forbidding you to set up in competition within a certain time frame).

bris

The whole concept of a franchise is to pay them fees, usually a percentage of turnover, some even charge extra for advertising, and promotions, etc.
Getting away without paying any fees for 5 years is unusual, but with the contract now up, they can charge for their services again.