A franchise agreement will usually contain the franchisee’s obligations relating to performance criteria, payment of fees (royalties, marketing fees, training fees, transfer fees, termination fees, utility levies etc.), marketing, reporting, training, supply of products and services, territory etc.
Why is a franchise agreement important in a franchising business?
In terms of franchising, one of the most important legal documents is the franchise legal agreement. This document legally forges the relationship between a franchisor and a franchisee. It specifies in particular the obligations and responsibilities of the franchisee to the franchisor and vice versa.
How long do franchise agreements last?
The typical duration of a franchise agreement is usually 10 or 20 years. This part of the contract will also spell out the conditions under which the franchise can be sold to someone else, which can be stringent to make sure that any future franchisee is qualified to be an owner.
Who are the parties to a franchise agreement?
A franchise agreement is the master legal document that sets forth the rights and obligations of the two main parties to a franchise: franchisor and franchisee. In legal terms a franchise agreement is a license from the franchisor to the franchisee.
Can a franchisee buy out a franchisor?
Some allow franchisees to sell their franchises at their discretion. Other agreements include buy back or right of first refusal clauses. These allow the franchisor to buy back the franchise at a rate determined by them or to match any potential buyer’s offer.
What are the rights of a franchisee to terminate?
In fact, franchisees often have no contractual rights to terminate early. Cause for termination generally includes failing to pay a franchise fee, filing bankruptcy or failing to make needed repairs to premises. The franchise agreement will also specify the conditions, if any, under which you can “cure” a default.
Is the franchise agreement a binding legal document?
A word of caution, a franchise agreement is a binding legal document and you may want to have a franchise attorney review it on your behalf prior to signing. Now, more about what you will find in the pages of the franchise agreement. Here are 10 fundamental provisions outlined in some form or fashion in every franchise agreement:
