Franchise agreements transfer the operating rights of a franchisor`s intellectual property and resources to a franchisee for a predetermined period. The rights and allowances awarded to a franchisee are very specific and leave little room for extension or error. If you are considering franchising your business in order to expand the reach and profit potential of your brand, then you will need a franchise agreement to enter into this business model with your franchisees legally. This document is prepared by you (the franchisor) and shared with potential franchisees to ensure that the legal requirements of both parties are clearly defined. This section of the franchise agreement should also specify who pays for insurance coverage. This contract describes the franchisee`s territory (exclusive or not) and sets a timetable whereby the franchisee must find a stationary site, have the unit`s plans approved and be expanded and open. Other issues may also be disclosed in this section, such as the computer equipment needed to operate the business, etc. Franchising is a consistent and lasting replication of a company`s brand promise, and an agreement must describe in detail the many business decisions that go to the creation of a franchise system. It is complex and, in most cases, a liability contract, which means an agreement that cannot change easily. One day, the franchise agreement will end. This may be a termination or a process, but the different exit strategies should be defined in the franchise agreement. This part of the franchise agreement should also indicate the steps taken at the end of the franchise agreement to separate or separate the franchisee from the business. The franchise agreement determines the relationship between the franchisee and the franchisor.
They should outline some aspects of this relationship so that both parties know what to expect. This is a key framework: franchisors and franchisees should reach an agreement that is fair to both parties, although certain elements, such as tariff structures, may not be at issue. This is the section of the franchise agreement that acts as a catch-all. All legal requirements that do not fall under their own section are dealt with here. The FTC rule provides that franchisors make available to potential franchisees a pre-sale document for the publication of franchises (FDD) to provide potential franchisees with the information necessary to purchase a franchise. Considerations include risks and rewards, as well as comparison of the franchise with other investments. In this section, the franchisor should reiterate the franchisee`s advertising obligations as indicated in point 11 of the franchise agreement (and the fees for which it is listed on points 5, 6, 7, 8 and 11 – if applicable).