When you want to open a franchise, you’ll have to sign a franchise agreement. This is to protect you and the franchisor. It sets expectations and enables you to know your responsibilities.
You shouldn’t ever sign a franchise agreement unless you read through the entire document. Even small details could end up being major issues in the future.
Basic elements in a simple franchise agreement
Some franchise agreements are detailed while others are simple. Even the simplest agreement should include these elements:
- Agreement parties: This should include the franchisor’s information and your information.
- Agreement duration: This outlines how long the agreement is for and should also include how to extend it.
- Site of the franchise location: This details where the franchisee’s business will be located and what’s required for the site.
- Operation details: This section details all the responsibilities of both parties, including procuring goods from approved vendors.
- Franchise fee: This is the monetary responsibility of the franchisee to the franchisor.
- Promotion and branding: This discusses the advertising responsibilities of both parties.
- Support and training: This outlines what the franchisor will do to help train the franchisee on the business operation model.
- Trademarks and intellectual properties: This details how the franchisee can use the intellectual properties and trademarks of the franchisor.
- Termination clause: This sets the steps for how the agreement can be terminated in the future, and it should also include any penalties.
Making sure the franchise agreement covers all the details you need is critical. Working with someone who’s familiar with these matters can help you determine if anything is missing. They can also help you if there are any issues with the agreement in the future because they’ll already be familiar with it.