… because franchise agreements can look just like credit card agreements.
I started reviewing and writing franchise agreements, even before I moved to Texas in 1989. When I first got here, franchise agreements seemed pretty balanced to me. It was standard practice to use phrases like “[franchisor] shall not unreasonably withhold its consent…”.
Nowadays the promise to act reasonably is simply not to be found in a franchise agreement. Instead these contracts seem to be written out of fear. Fundamentally the fear is that if something goes wrong the franchisee will sue the franchisor. And to some extent, that is true. Both an inability to take responsibility for results and a tendency to put the blame on someone else are common characteristics in the franchise world.
The desire to take control and to avoid accountability are competing motivations that experienced franchise lawyers work hard to satisfy for their franchisor clients. As franchising has matured, franchise lawyers have learned from their franchisor clients where problems arise in the franchise relationship and what to draft to give the franchisor the best options and the most control. Although I have done my share of this in drafting franchise agreements, in recent years I have been taking stock of what I put in my agreements. Is a harshly restrictive provision necessary? Does the client really want it? Understand it? Need it??
Should the franchisor put its foot on the throat of its franchisee? Other than promising to train the franchisee on basics of starting the business, why should it commit at all? if it can sell franchises with no continuing obligations at all, why should it go out of its way to promise anything?
As long as franchisees say “yes” and sign franchise agreements that promise nothing, take a large piece of revenue, and control much of what the franchisee can do, why would a franchisor promise any more? There is no motivation—unless the PROSPECTIVE FRANCHISEES JUST SAY NO!