Franchise agreements vary between different franchises, but these seven areas should be addressed in every 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
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