A franchise agreement is a contract between a franchisor and a franchisee that sets out the terms and conditions of the franchise relationship. The agreement will typically include provisions regarding the franchisor’s trademarks and intellectual property, the franchisee’s obligations, the territory in which the franchise will operate, the term of the agreement, and the fees payable by the franchisee.
1) Are there any deferred balances?
Make sure to check for deferred balance or clauses related to it. You should also check if the balance exists, who finances the same and what is the interest rate?
2) Are there periodic royalties?
Periodic royalties are the ones that are paid annually or bi-annually. Payment is not done right after the sale but after a period of time. Make sure to check for periodic royalties in your agreement. If so, how much are they and how are they determined?
3) How are advertising and promotion costs divided?
Considering it to be a franchise of a brand, the promotions and advertisements take place across the brand. While getting into the agreement, you should also check the terms of promotions and advertisements. How will it be done, if the franchise owner has the autonomy, how will the costs be divided, etc.
4) Are there any restrictions on remodeling or redecorating?
Every brand has a specific interior, color scheme and other intellectual properties. Do check if you are allowed to remodel or redecorate your franchise the way you want to or if there are any restrictions on the same.
5) To whom will the franchise go in case of death/disability?
The agreement should mention it clearly as to what happens in case of death or disability. Is the franchise assignable to heirs, or may it be sold by the franchisee’s estate on death or disability?
Franchise Agreement is a complicated task, reach out to the right attorney for getting this drafted.
Want to learn more about franchise agreements?
The franchise agreement is the most important document in franchising and is crucial to your franchise businesses potential success. You must ensure that you clearly understand everything highlighted in this agreement. If you would like to learn more about franchise agreements and how they work, you will be happy to hear there are plenty of free guides online for this from websites such as Franchise UK, but if you want an expert, you should consider contacting a franchise lawyer if you need any extra clarification on anything before signing the dotted line.
