The Franchise agreement format is almost universal. A franchise agreement is a legally binding document between the franchisor and franchisee. It sets in stone the agreements' terms and conditions. The thing is that most established franchise holders have an ironclad contract with virtually no room for negotiations. They present you a contract and it is what it is. The contract is there to protect the franchisor and all of it is in their favor so before you sign you need to be sure you understand every line.
The Federal Trade Commission has rules regarding how the contracts should be handled. They have set forth that a potential franchisee must be given a copy of the franchise agreement at least five business days before it is to be signed. This will allow them the time to consult with an attorney to get the contract details explained in plain English. Even if you have had a franchise before, it is best to have it read and explained by an attorney. There is no standard format for these types of agreements and each business will have something included that is vastly different from all the others.
What You Can Expect In A Franchise Agreement
Below you will find a few of the things that are generally spelled out in detail as a integral part of the franchise agreement format. You should make it a point to go over each of them with care and to make sure you understand the reason for its being there. When looking for an attorney to help you to understand a franchise agreement it is best to find one that specializes in this type of contractual law. The language used for the following items can be a bit confusing otherwise.
1. Territory - Some franchises include exclusive rights to certain areas. The contract must include details of the award and how the territory is to be defined. For example is it zip code to zip code, square miles etc.
2. Time - The term of the agreement should be clearly stated. Most franchise agreements are only good for a set number of years, most are 5-10 year contracts. If it is renewable it should also be included and what the criteria will be for renewing the contract.
3. A list of all fees and payments due - There are three fees that are common to most all franchise agreements. They are the initial fees for the franchise, royalties and marketing contributions. There may be other fees but you must make certain they are included from the top.
4. Franchise support - What exactly are the franchise holders going to do for you the franchisee. What types of training and support can you expect from the parent company? This is very important and should be in full detail in the franchise agreement.
5. Franchisee's obligations - This section shows you what they expect from you as a user of their intellectual property. Most franchises have uniformity across the country that all franchises must adhere to. This includes things like opening and closing times, uniforms, licenses, permits, suppliers hiring and training of employees and so much more.
6. Trademarks - A franchise agreement must spell out what is acceptable and unacceptable use of the franchise trademarks and other proprietary properties.
7. Advertising - most franchises have approved advertising formats that must be strictly adhered to. Your contribution to the advertising budget must be spelled out to the letter. The franchise agreement should list what the cost is and how much you are expected to contribute.
There are many other items that will be listed in a franchise agreement. It is imperative as you can see that you allow yourself time to become familiar with all the various items in the agreement before signing on the dotted line.
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