Case Study: Cross Border Franchise Development Joint Venture
When we were approached by long-standing client Bread Ahead, Matthew Jones asked us to advise him on launching Bread Ahead’s first franchise in the Kingdom of Saudi Arabia. What quickly became apparent was that although the deal involved some elements of a usual franchise relationship – in that Bread Ahead was granting a licence to allow a third party to operate under its brand, and would charge royalties – the reality was that the parties saw themselves much more as joint venture business partners. This meant that more often than not we departed from the more conventional franchise terms to negotiate a much more complex and bespoke arrangement.
A key concern of any franchisor is to make sure that their business model, brand and assets are properly protected. This usually means building rights and restrictions into franchise agreements, such as rights of the franchisor to carry out inspections (or site visits) of the franchisee’s business and to receive regular information about how the business is performing. Franchisors also usually have a level of control over how a franchisee’s business is operated – for example, how branding is used.
As solicitors our role was to highlight possible risks to our client; and to work with Matt, the franchisee and their lawyers to reach a fair compromise.
The cross-border nature of this deal meant that we needed to be alert to the fact that the business would have to comply with local requirements, such as the need to register the agreements with the Ministry of Commerce and the Saudi Authority for Intellectual Property. This meant liaising with local advisors. We also had to take special care when it came to drafting certain terms where they differed from the standard provisions under local franchise law. This is particularly important in relation to requirements for renewal, transfer of the business or termination under KSA law.
Ultimately, the parties were able to work together to reach an agreement and we were delighted to have been able to work with Matt on this project. Now looking forward to the next one…
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