I have applied for an opportunity to join a company that I have seen online. When contacted by the company, I understood that what they were offering was a franchising opportunity. I ended up paying the starting fee and attended a one-day training. So far I have not signed any contract and I do not have much information about what is included in the franchising contract. In their publicity they say they have a 6-month break clause. After researching more information about becoming a franchisee, I feel unsure about the type of business I have entered into and I’m not sure if I am legally protected and if I can stop these sort of agreement and get my money back.
From the details you have provided, it doesn’t sound like this is a franchise in the sense recognised by the British Franchise Association which we define as business format franchising. In brief this can be encapsulated as the granting of a license by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade as their own business using the brand, systems and support of the franchisor. Normally, you would expect to go through a quite rigorous selection process which would enable you to make your own decisions on the brand, their people, their products/services and support while allowing the franchisor to gauge you as suitable for their network. You would also only be in discussion with a franchisor at this depth if they had a franchise territory that worked for you geographically (normally, although some franchises are demarcated in other ways). You would only be expected to pay down a territory reservation fee once both parties have decided they want to move in effect into due diligence with each other. This allows both parties to exchange more in depth facts and figures about themselves under a non-disclosure agreement. An ethical franchisor will allow you to pull out even after this stage and refund the reservation fee less any tangible direct costs they may have incurred. You will have had the opportunity to see their franchise agreement and their operations manual, the former being the whole contract between you and the franchisor, the latter being the complete ‘how-to-run-the-business’ documentation. You will have also been given the opportunity to talk to other franchisees in the network to get a perspective from them.
The term franchise is sadly still used to define business opportunities that don’t match the definition of good, ethical franchising. I’m afraid I can’t say much more to reassure you or signpost you to other resources without knowing more about your situation. I hope, however, this has been some help. There is much more information for prospective franchisees on the bfa website.