Organizing Your Document
- 1 Search online for templates. While you can hire an attorney to draft your franchise agreement, it often is cheaper and more effective for you to use online templates to draft the agreement yourself. [3] ...
- 2 Compile information related to your business. ...
- 3 Identify the parties. ...
- 4 Write your introductory paragraphs. ...
- 5 Include a section for definitions. ...
- be in as plain language as possible;
- reflect your business systems and structure;
- comply with the provisions of the Franchising Code of Conduct;
- set out the commercial terms between the parties (such as the fees to be paid);
How do you create a franchise agreement?
Fundamental Provisions of the Franchise AgreementLocation. This provision defines the franchisee's territorial limits, the area the franchisee has the right to operate and outlines its exclusive rights (if necessary).Site selection and development. ... Royalties. ... Franchise validity. ... Fees. ... Training support. ... Operations. ... Trademark.More items...•
What is an example of a franchise agreement?
A franchise agreement incorporates the rights and obligations of the franchisor and franchisee to license and sell a company's intellectual property and licensing rights. Examples of businesses that use franchise agreements include: Convenience stores. Fast food and chain restaurants.
What 3 things are typically included in a franchise agreement?
Franchise agreements vary between different franchises, but these seven areas should be addressed in every franchise agreement.Use of Trademarks.Location of the Franchise.Term of the Franchise.Franchisee's Fees and Other Payments.Obligations and Duties of the Franchisor.Restriction on Goods and Services Offered.More items...
What are the 4 types of franchise arrangement?
Below are four types of agreements franchised businesses commonly form.Single-Unit Franchise Agreement. In a single-unit agreement, the arrangement grants the franchisee the right to open and operate a single franchise unit. ... Multi-Unit Franchise Agreement. ... Area Development Franchise Agreement. ... Master Franchise Agreement.
What is a standard franchise agreement?
A franchise agreement is a contract under which the franchisor grants the franchisee the right to operate a business, or offer, sell, or distribute goods or services identified or associated with the franchisor's trademark.
What is the most important key subject in the franchise agreement?
Trademark and intellectual property One of the most important elements of a franchise agreement is the right to use the franchisor's trademark. The franchisor must register the trademark and have the exclusive right to use it.
How much is the average initial franchise fee?
between $25,000 to $50,000Franchise fees are typically between $25,000 to $50,000 on average. 2) Startup Costs: These are the expenses you'll incur to get your new business open and operating. Initial investment costs vary widely from franchise to franchise.
How long is a typical franchise agreement?
between five and 20 yearsThe typical length of a franchise agreement is between five and 20 years. A common reason for this general length of time is often the size of the franchisee's initial investment, though market conditions and the type of franchise can also be factors.
How much is the initial franchise fee?
$25,000 to $65,000Franchisors are not required to charge any minimum amount, but initial franchise fees generally range from $25,000 to $65,000 for the right to develop one franchise. The franchisor needs to be competitive with the price it charges as an initial franchise fee to attract the right franchisee.
What is the most common type of franchise agreement?
single unit franchiseA single unit franchise is an agreement where the franchisor grants a franchisee the right to open and operate one franchise location. This is the most common and simple type of franchise relationship.
What are the common franchise terms?
Here are a few common franchise terms that you should be aware of. A Franchisor is the owner of the franchise brand and business system. Franchisors can license their franchise to various franchisees. A Franchisee is a person or group who licenses the right to carry out business under a particular franchise trademark.
What is single franchise agreement?
A single-unit franchise is an agreement that allows a franchisee to open and operate just a single location. Single-unit franchises are typically managed and run by the franchisee rather than by hired staff.
What is an example of a franchise business?
Examples of well-known franchise business models include McDonald's (NYSE: MCD), Subway, United Parcel Service (NYSE: UPS), and H&R Block (NYSE: HRB).
What are the common franchise terms?
Here are a few common franchise terms that you should be aware of. A Franchisor is the owner of the franchise brand and business system. Franchisors can license their franchise to various franchisees. A Franchisee is a person or group who licenses the right to carry out business under a particular franchise trademark.
What are the main ingredients of a franchise agreement?
For those who wonder what all this agreement states, here are the essential elements of a franchise agreement.Franchisor-Franchisee Relationship. ... Duration of the Agreement. ... Franchise Fee. ... Business Operations. ... Site Selection and Development. ... Training and Support. ... Use of Intellectual Property.
What is the importance of franchise agreement?
This document legally forges the relationship between a franchisor and a franchisee. Without it, a lot of business-related threats, mishaps, and breaches could be committed both intentionally and inadvertently by all parties involved. The franchise agreement is what defines and details the franchise relationship.
What is a franchise agreement?
Simply put, a franchise agreement is the legally binding document drawn up between a franchisor (the company that owns the brand/system of doing business) and the franchisee (the person who is buying into the franchise).
What does a franchise agreement include?
The most typical franchise agreements are single and multi unit, and they will usually include variations on these clauses:
How do you draft a franchise agreement?
While there are franchise agreement advantages disadvantages, one good thing about them is that many of the parts of the franchise agreement are negotiable. Another thing is that you probably won’t have to come up with one on your own.
What is a franchisee's prior written approval?
The Franchisee shall obtain the Franchisor’s prior written approval of all advertising or other marketing or promotional programs published by any method , including print, broadcast and electronic media, regarding the [Insert Franchise Name] franchise, including, without limitation, “Yellow Pages” advertising, newspaper ads, flyers, brochures, coupons, direct mail pieces, specialty and novelty items, radio, television, and Internet advertising. The Franchisee acknowledges and agrees that the Franchisor may disapprove of any advertising, marketing, or promotional programs submitted to the Franchisor for any reason in the Franchisor’s sole discretion. The Franchisee shall also obtain the Franchisor’s prior written approval of all promotional materials provided by vendors. The proposed written advertising or a description of the marketing or promotional program shall be submitted to the Franchisor before publication, broadcast, or use.
When is a Franchisor's agreement effective?
This Agreement shall not be effective until accepted by the Franchisor as evidenced by dating and signing by an officer of the Franchisor.
How long does a franchisor have to provide on-site training?
In addition to the other operational assistance and advice provided by the Franchisor pursuant to other provisions of this Agreement, at the opening of the Franchisee’s location and for a period of 0 days thereafter, the Franchisor shall provide the on-site services of a representative to assist the Franchisee and provide further on-site training in connection with the operation of the Franchisee’s location.
What does a franchisor provide?
In addition to the Franchisor’s initial training, equipment list, design services, Operations Manual, and other pre-opening services described elsewhere in this Agreement, Franchisor will provide the Franchisee prior to opening with a list of approved and designated suppliers and an advertising plan and advertising copy for Franchisee’s grand opening.
How long does it take to move a franchise to a new location?
The Franchisor will have 30 days from receipt of the Franchisee’s written request to respond. If the Franchisor approves the relation and the proposed new location, and if the ownership of the Franchisee does not change in any respect from the ownership of the Franchisee before the relocation, then the Franchisee may move its franchise to the new approved location, provided that the Franchisee signs the Franchisor’s then-current form of Franchise Agreement and opens the franchise at the new location within 12 months after the franchise closes at its former Franchised Location. In, addition, the Franchisee will be required to pay a nonrefundable design fee of $ [Insert amount] as a fee for the preparation of a design for Franchisee’s new Franchised Location. A similar design fee will also apply if the Franchisee requests design assistance in remodeling its franchise at any time during the term of this Agreement.
What is a franchisor?
The Franchisor has developed methods for establishing, operating, and promoting businesses engaged in the business of [Insert Franchise Type] using the service mark and related trade names and trademarks (the “Marks”) and the Franchisor’s proprietary methods of doing business (the “Licensed Methods”).
How long does it take for a franchise to abandon?
If the Franchisee ceases to operate the [Insert Franchise Name] franchise or otherwise abandons the [Insert Franchise Name] franchise for a period of 0 consecutive days, or any shorter period that indicates an intent by the Franchisee to discontinue operation of the [Insert Franchise Name] franchise, unless and only to the extent that full operation of the [Insert Franchise Name] franchise is suspended or terminated due to fire, flood, earthquake or other similar causes beyond the Franchisee’s control and not related to the availability of funds to the Franchisee;
What is a Franchise Agreement?
Franchise agreements are legal documents between a franchisor and a franchisee. They generally include franchise disclosure documents (FDDs) governed by the Federal Trade Commissions’ FTC Franchise Rule. A franchise agreement incorporates the rights and obligations of the franchisor and franchisee to license and sell a company’s intellectual property and licensing rights.
Who is involved in a franchise agreement?
The parties involved in a franchise agreement are the franchisor and franchisee. While there may be third parties involved, such as franchising lawyers and insurance companies, the center of a franchise agreement applies the primary principles described below.
Do franchise agreements have the same elements?
Franchise agreements primarily contain the same elements regardless of the type you use. There may be critical differences, however, if you need a highly specialized agreement. As such, you should always seek a customized option when drafting your contracts.
How to get out of franchise agreement?
In some cases, franchisees decide to get out of their agreement. However, it’s not that simple, especially if your franchise agreement template doesn’t have a clause for termination. However, a franchisor has the right to terminate the franchise agreement if the franchisee:
What is included in a franchise contract?
The franchise contract must also specify the amount of the fee the franchisee must pay. This may include an initial fee and ongoing royalty payments. Before signing, the franchisee must understand everything written on the document including any restrictions and provisions stated therein.
How does a franchise agreement differ from a license agreement?
A lot of times, people confuse franchise agreements with license agreements. Although similar, these are very different documents. There are three main factors which turn a license into a franchise:
What is a termination clause in a franchise agreement?
Usually, such clause includes statements for either the franchisor or the franchisee to: suspend the performance under the franchise contract where there’s a material breach by either party; or.
What is the difference between a franchise agreement and a post-term agreement?
The “ in-term” covenant states that the franchisee must not compete against other franchisees or the franchisor while the franchise agreement exists. Conversely, the “post-term” covenant states that the franchisee mustn’t open a competing business after the expiration of the agreement or after earlier termination due to a breach of contract.
What is the right of the franchisor to first refuse a franchise?
The Right of the Franchisor to First Refusal. Some agreements provide the franchisor with the option, not the obligation to exercise this right. This is important in cases where the franchisee wants to transfer his franchise or when the agreement gets terminated or expires.
What is a grant of franchise?
Grant of Franchise#N#This section states that the franchisor grants the franchisee a non-transferable, non-exclusive, and limited right to use its logos, trademarks, services, and the system of operation for a specified amount of time as defined by the agreement. Also, this section contains a statement about how the franchisor has the right to terminate the agreement in the case of a breach of contract.
Who drafts franchise agreements?
Franchise agreements are drafted by the franchisor, and the franchisee is given a template to sign. However, whilst the drafting is in the franchisor ’s control, the franchise agreement is not set in stone and can be negotiated by the franchisee depending on the relative negotiation power or balance between the parties.
What are the rights of a franchisee?
The franchise agreement establishes rights such as territory, term, minimum performance, franchise services, fees and payment, training provided, intellectual property rights, use of intellectual property, and other rights/obligations of the franchisee.
What is franchised right?
The franchised right granted is a license to the franchisee and not a transfer of ownership right over the intellectual property by the franchisor. The franchisor will define each item of its proprietary intellectual property, confidential information and trade secret very specifically and explain the restrictions on the franchisee's right to use them in the franchised business. This is important for the franchisor to protect the brand value of its business.
What is a master franchise?
A master franchise is an expanded type of territorial development franchise with the franchisee not only has the right to open and operate franchise units in the designated territory, but also has the right to sell the franchise rights to others in the territory. The master franchisee is essentially a sub-franchisor, and therefore bears many rights and responsibilities of the franchisor to the franchise unit in the territory, such as providing support and training in the territory. As a sub-franchisor, the master franchisee will be collecting fees and royalties from franchisees in the territory.
What is multi unit franchise?
This is a type of Multi-Units Franchising where the franchisee is given a territory to develop certain units within a period of time. The arrangement is generally exclusive, which means no other franchisee will be granted the same territory during this time. However, the franchisee may lose its exclusivity if it fails to meet certain milestones in developing the territory as required under the franchise agreement.
What is single unit franchising?
Single unit franchising refers to an agreement by which the franchisor grants the franchisee the right to open and operate one premises for the franchise business. This is the typical starting point for most franchisee to test the water.
How long does it take to terminate a franchise?
In certain jurisdictions, the franchisee is allowed a cooling-off period (usually 7 – 30 days), during which it can terminate the franchise agreement without providing reasons. This is to prevent the franchisee from being lured into an unscrupulous franchise arrangement with long term payment obligations without thinking it through.
