The Franchise Agreement

The Franchise Agreement is the contract you will be required to sign with the Franchisor before you will be able to open for business. This document spells out exactly what you must do, what you can do and what you cannot do as a Franchisee.

Typically covered in a Franchise Agreement include: your duties and rights to develop a location or multiple locations; what training will be provided; what computer and software you'll have to use; your rights to use the company's trademarks; the exact legal relationship you will have with the Franchisor; what proprietary information you'll be able to access and how that information is controlled; the fees you'll pay up front and on an on-going basis; operating standards; marketing & advertising guidelines, programs & requirements; record keeping and reporting requirements; transfers of ownership; rights of successors; defaults; dispute resolution; rights and obligations on transfer or termination; and renewal requirements.

You will, of course, have had ample opportunity to review this document before you sign it as it is required to be a part of the UFOC. The Franchisor is wise to suggest that you have the document reviewed by and explained to you by your attorney. As was mentioned in the prior post, do not expect to be able to change or negotiate the terms of the Franchise Agreement. In almost every case, it is what it is.

You must understand the terms of the Agreement. If you are not comfortable, you should reconsider your decision to become a Franchisee of this company. This document is very precise and you will be expected to honor all of your obligations. Some of your obligations continue even after you have ceased to be a Franchisee.

Many people who choose to become Franchisees spent their earlier careers in a management position at a corporation. As such, most are familiar with the expression, "think outside the box." These same people were expected to heed this and were often rewarded for those efforts. In the world of business format franchises, the Franchise Agreement is "the box." The Franchisor expects - and may even require - that their Franchisees will stay inside that box. Those who don't follow the prescribed program often find themselves in trouble with the Franchisor.

Franchising can be an excellent means for a person to leverage their skills into a business of their own. However, it is vital to do your homework before you choose this path for yourself.