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Buying a Franchise

What is a Franchise Agreement

A franchise agreement is the key document outlining any franchisor/franchisee relationship and is legally binding for both parties. This document clearly states the obligations, expectations and legal rights of both signing parties and is the foundation of every relationship within the franchise organization. These franchise agreements are created to ensure the roles and expectations of each party are clearly defined.

It is necessary for franchisors to provide a copy of this agreement to all potential franchisees at least five business days before they sign a franchise contract, so that it can be reviewed by an attorney to ensure there are no problems with the wording or content. It will contain many of the same issues covered in the Franchise Disclosure Document, but in more detail, specifically tailored to each company.

The franchise agreement will contain detailed information regarding the obligations of both parties on how the new business should be operated, how employees should be trained, how much the franchisor will be paid in fees and royalties, how long the contract lasts, what territory a franchisee can operate in, what type of initial training, ongoing support and advertising they can expect as they open up and continue to run their operation. It will also outline up-front fees, what will happen if the franchisee wishes to transfer ownership or sell the franchise, how disputes will be settled, and how and when the franchise agreement can be terminated.

Each franchise agreement will be different, as every franchise business operates in its own way with its unique methods, operations, training. Because of this, it's important to have a trained franchise lawyer go over the agreement to ensure there are no anomalies or questionable content that may weigh too heavily in favor of one side over the other.

My Franchise Law - About the Author
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