The Franchise Agreement is a legal document that governs the franchisee/franchisor relationship. There is no specific format to go by for a franchise agreement because each franchise varies. In general, here are the 10 things that are covered in the franchise agreement.

First, training and support provided by the franchisor is talked about in the franchise agreement. Each franchisor has their own training program for their franchisees and sometimes offers support throughout their time as a franchisee. The franchise agreement will tell you what kind of training the franchisor will provide as well as whether or not they will provide ongoing support.

Second, the franchise agreement will also let you know what territory you will operate and whether or not you will have exclusivity rights.

Third, the agreement will tell you how long the agreement lasts.

Fourth, the agreement will tell you how much the franchise fee is, which gives you the right to the franchisor’s trademark and operating system.

Fifth, the franchise agreement also tells you how you can use the franchise trademark, patent, and signage.

Sixth, the agreement will also tell you the rest of the fees you are expected to pay. Most franchisors require franchisees to pay a royalty fee which is usually 4-8 percent of the total sales, usually monthly.

Seventh, it will include information on advertising. The agreement will let you know what fees you have to pay toward advertising and how much advertising the franchisor will provide.

Eighth, the agreement tells you how franchisees are supposed to run their outlet.

Ninth, the franchise agreement tells you what renewal rights you have and franchisee termination/cancellation policies. Some franchisors put an Arbitration Clause in the agreement which states that if legal action is warranted on either side, that an arbitrator will view the case instead of going to court.

Tenth, the agreement also states your resale rights. Some franchisors let franchisees sell their franchise for whatever reason. However, some refuse the right for franchisees to resell the franchise, which allows the franchisor to buy it back for their own set price or may match the first potential buyer’s price.

That is the gist of a franchise agreement.

This entry was posted on Thursday, January 10th, 2008 at 3:58 pm and is filed under Franchise Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.