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I and two friends are considering buying a boutique gym

franchise and as part of...
I and two friends are considering buying a boutique gym franchise and as part of our research into the company we have asked to view a copy of the agreement we would eventually sign with them. They have come back to say that they can't show us the agreement until we have paid the initial deposit due to issues with IP. We would therefore appreciate some guidance on whether or not this is usual or if they are acting unreasonably. Should they also be agreeable to share with us a full business plan, preferably of an existing business? At the moment we have only viewed a hypothetical plan. We have visited 2 of their sites which have both recently opened and we have gathered a fair amount of information about the company and are reasonably satisfied with their business model and the believe in the product they are offering. However, we feel we are lacking on advice regarding legal and financial issues. The company currently has approximately 25 franchises and they started 10 years ago. HSBC is the bank that they partner with to offer financing to franchisees. We met with the bank last week at the franchise show where the gym was one of the main sponsors and they advised us to ask for a full business plan. Thank you.
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Answered in 5 minutes by:
3/13/2018
philip.simmons
Category: UK Law
Satisfied Customers: 37,672
Verified

Thanks for the chance to help. I am an attorney with over 12 years experience. Hopefully I can help you with your legal question.

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I have never heard of that business model...is the "deposit" refundable if you do not complete the contract?

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Customer reply replied 5 months ago
the deposit is £10,000 - at that point they reserve a territory for you and they then build a specific business plan once you have found a property. Their point is that there are too many variables before that to be able to offer you anything concrete as the membership fees etc you will charge are all dependent on the property you will find, rent payable, position etc. Only once you are happy with everything would you then move forward and sign the agreement with them and pay the full franchise fee etc.Up until this point you can walk away at any time and 50% of your deposit will be refunded.

Ahh...sorry, it looks like this was sent to the US category...I need to ship this over to UK. No need to respond...when someone can field this, they will respond here.

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Buachaill
Buachaill, Barrister
Category: UK Law
Satisfied Customers: 11,225
Experience: Barrister 17 years experience
Verified

1. You would be very foolish to pay a deposit merely to see the Terms & Conditions upon which you will contract. This is because by handing over a deposit you are essentially committing yourself to an agreement you have never seen. Additionally, you will lose 50% of your deposit just to see what the potential Terms & Conditions are. So, the bot***** *****ne is that you will never get a lawyer who will tell you to pay a deposit merely to see the conditions upon which your business relationship will be based. Forget about IP issues. That is merely an excuse to hide something in the fine print and get you to pay over money for which you have no comeback. It is a shyster's way of doing business. IP issues never preclude being transparent about business practices and Terms & Conditions.

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2. The bot***** *****ne is that you will pay 5k just to see what is on offer. That is a very bad bargain when you are getting nothing in return for you showing interest. The advice to see a full Business plan was correct advice. Additionally, you should always see the terms of the franchise before you start handing over your money.

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Buachaill
Buachaill, Barrister
Category: UK Law
Satisfied Customers: 11,225
Experience: Barrister 17 years experience
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