Franchise agreement is considered as the foundation built in every relationship between the franchisor and the franchisee. It is a written legal document that governs the relationship between the two parties. It even gives specifications to the terms with regards to the obligations involving the rights and responsibilities, fees and payments, and the duration of the agreement. Due to the fact that franchise agreements outline the obligations of both the franchisor and the franchisee, it is still highly important to have an in-depth and complete understanding of the all the information and provisions so that both of them will be aware of what is expected of them in the business.
There is no known uniform standard form of franchise agreements. It is because the terms and conditions and the methods used in operations differ depending on the type of business. Every franchisee has to sign a franchise agreement and the same thing goes with the franchisor. Take note that a franchise agreement is a legally binding document which could mean that you can involve franchise attorney to review the agreement on your behalf before you are going to sign it.
10+ Franchise Agreement Checklist Samples
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Every franchise has its own processes and operational systems. There are no two franchise agreements that will look exactly the same. However, they have the same principles of ethical franchising. There are actually top ten (10) questions that you might want to consider putting into your franchise agreement checklist:
- How long do you think is the franchise agreement?
- What could actually happen at renewal stage?
- Can you sell your franchise? If yes, how will the process be managed?
- How are you going to define your franchise territory?
- In what way will the franchisor be paid?
- What are you going to purchase from your franchisor?
- What should be included in the franchise package?
- Are there any contracted promotional activities involved?
- Do you have any performance targets? If so, what might happen if you don’t achieve them?
- How will the agreement be terminated?
When reviewing to your franchise agreement, you also have to know the common elements that will be covered in the document.
- Fees – this will explain as to how much you are going to pay including the franchise fee, royalty fee, and other additional fees.
- Intellectual property rights granted – the franchisor will give a restricted license to the franchisee. The franchisee will be given the permission to use the logo, operating system of the business, and the trademarks.
- Training and operations – the trainings, restrictions, limitations, and requirements will be included in this section.
- Franchise term length and specifications for the renewal of the term
- Conditions under which the franchise can be terminated
- Post-term requirements – these are the steps need to be taken by the franchisor after the term ends.
- Territory granted – this section will help you know in what way your territory will be granted and if your franchise an exclusive territory or not.
- Advertising and marketing
- Design and renovations
- Performance requirements
- Insurance requirements
- Indemnification – this is the outline of how your franchisee will pay back to the franchisor if ever that the franchisee causes any damage to the brand.
- Casualty – this should be able to define what processes needs to be done if a business location sustains a major damage.
- Contingencies in the event of death or incapacity
What are the fundamental provisions outlined in every franchise agreement?
What are the things that are prohibited to be placed in the franchise agreement checklist?
You have to be aware that you won’t be able to negotiate.
If you want to see more samples and format, check out some of the franchise agreement checklist samples and template provided in the article for your reference.
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