A franchise agreement is a legal document between a franchisor and a franchisee that outlines the rights and obligations of both parties to license and sell a companys intellectual property and licensing rights. The following are some of the common themes that run through most franchise agreements:
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Territory: The franchise agreement will designate the territory in which the franchisee will operate and outline any exclusivity rights they may have.
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Operations: This section details how franchisees are expected to run their units, including requirements for training, participation in the business, and keeping and submitting adequate records.
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Trademark use: One of the main benefits of purchasing a franchise is the use of well-known trademarks. This section lists the trademarks, service marks, or logos the franchisee is entitled to use.
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Franchisee fees and other payments: This section describes all the mandatory fees, including the initial fee and what the franchisee receives for that fee, as well as royalty payments, what they are based on, and when they are due.
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Obligations and duties of the franchisor: This section outlines what the franchisor expects from the franchisee in the way they operate every facet of the business, including requirements for training, participation in the business, and keeping and submitting adequate records.
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Restrictions on goods and services offered: This section describes any restrictions placed on the goods or services offered, including requirements to maintain a uniform service and quality across the network and to protect the franchisors brand.
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Renewal and termination: This section outlines the duration of the agreement, whether the franchisor can purchase the franchise before the agreement expires, and whether the franchisee has the right to renew the agreement.
It is important to note that there is no standard form of franchise agreement because the terms, conditions, and methods of operations of various franchises vary widely depending on the type of business.
