‘From time to time’ franchisees, and even normal folk, put their signatures to contracts that in hindsight were obviously intended to separate them and their money and deliver simmering leverage as a ‘don’t argue’ surprise.

Or perhaps the contracts were simply designed to amuse those who wrote them or make those that had fallen into similar foolish acts feel a little better. Maybe?

I was prompted to write this blog following receipt of an email from a desperate franchisee and while many have read [or signed] similar contracts I thought we might share our experiences, and likely interpretations, of comparable clauses.

My new friend gained his enlightenment from fellow franchisees who were only too eager to explain the ‘new’ contract in comparison with the ‘old’ contract and the historical successful franchisor behaviours that created the confidence to recently up the ante.

I’ll start the ball rolling with the dilemma facing my perplexed friend. He is now gaining an insight into how his franchisor, in this case Poolwerx Australia, utilizes the following contractual rights;

• Designated territories have been replaced with ‘Marketing Areas’ [obviously to ensure overlapping success].  Marketing areas are subject to change [where territories were inefficiently once exclusive].
• Franchisee protections from encroachment are removed.
• The franchisor has the right to direct sell product [compete with franchisees] on the Net.
• Franchisees are now forbidden from any internet marketing and cannot register a domain name with the trademark, name, the words pool, spa and franchise or any derivative.
• The franchisee can be terminated for failure to meet [unstated and apparently arbitrary Key Performance Indicators – KPIs].
• Mandatory KPIs are reviewed quarterly [or whenever the franchisor finds a need to scratch] and are subject to change at any time via the Operations Manual.
• Should a failure to meet KPIs not result in a forced sale or termination, a failure can result in refusal to renew, refusal to assign and/or a refusal to allow the franchisee to increase service van numbers or open a shop. [‘Tier Transition Method’ being a weapon of mass compliance].
• Upon advice that he must sell his franchise, the franchisor must allow the franchisee a whole 90 days to find an ‘approved’ buyer [or the franchisor takes control and (profits from) on-sells].
• Upon termination [including ‘default’ termination and expiration of the contract] the exiting franchisee cannot operate within that industry for 3 years. Or at least anywhere on this planet.  
• Non-compete restraint is now a cascading set of clauses fully severable from each other and contain an acknowledgement that the franchisee agrees they are fair.
• The contract provides the power to ensure franchisees insist managers and key personnel sign contracts with similar restraints
• Added clauses maintain that franchisees must sign any new deed, agreement or notice in a form prepared by the franchisor should the franchisor assign or novate any of its assets, rights and obligations. [not new in contracts but new to Poolwerx].

How would you interpret these particular clauses? Perhaps there is no sinister motivation behind these introductions and variations. 

I’m not sure whether BMM readers have any similar clauses and interpretations to share with prospective franchisees?