The franchise agreement
The franchise agreement is the written document that sets out the terms of the arrangement between the franchisee and franchisor. It covers in detail the rights and obligations of each party. It is important that the agreement is fair to both parties, ensuring that franchisees are properly supported, and that the franchisor can act in the best interests of the business as a whole and protect their intellectual property.
Key terms a franchise agreement should cover include:
- The rights afforded to the franchisee, including use of brand names and trade marks and the right to sell specified goods or services.
- The rights retained by the franchisor, such as the right to dictate how the franchisee operates their outlet – for example, in terms of quality or customer service.
- Territory restrictions, detailing the geographic area in which the franchisee is entitled to operate and any exclusivity that exists in this arrangement.
- The initial resources and information that the franchisee will receive, such as the operating manual and training.
- The support services that the franchisor will provide to the franchisee, such as administrative and marketing support.
- The fees the franchisee will pay the franchisor and the payment schedule.
- The length of the agreement, and arrangements for renewal, or otherwise, once the agreement ends.
- A termination clause, specifying the grounds on which either party can terminate the agreement, and the consequences of such a termination.
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