What Are the Key Subjects in the Franchise Agreement?

Use of Trademarks

One of the main benefits you receive when 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.

• Has the trademark been in operation for a significant amount of time and is it well known?

• Are there any restrictions on its use by the franchisor or franchisee?


Location of the Franchise

This section describes the exclusive area or territory granted to the franchisee.

• Do you have exclusive rights in a certain territory?


Term of the Franchise

In this section, the duration of the agreement is specified.

• How long does the agreement last?

• Can the franchisor purchase the franchise before the agreement expires?

• Do you have the right to renew the agreement?


Franchisee’s Fees and Other Payments 

In this section, all the mandatory fees are described:

• initial fee and what the franchisee receives for that fee

• royalty payment, what it is based on and when it is due


Obligations and Duties of the Franchisor

This section describes the franchisee’s responsibilities:

• requirements for training

• requirements for participation in the business

• requirements for keeping and submitting adequate records


Restriction on Goods and Services Offered

This section describes any restrictions placed on the goods or services offered, including:

• required quality standards

• approved suppliers

• approved advertising

• hours of operation

• pricing


Renewal, Termination and Transfer of Franchise Agreement

This section includes:

• the rights and obligations of a franchisee upon termination

• descriptions about the transfer of the franchise agreement

• descriptions about the renewal of the franchise agreement