What Should a Franchise Agreement Contain?
If you are developing your business through franchising, a franchise agreement is key to protecting your brand. In essence, it sets out how your brand can, and cannot, be used, and the critical elements of your business format.
The agreement must be tailor-made for each franchise concept. There is no such thing as a “one size fits all” format. A professionally drafted, bespoke franchise agreement will protect your business, create certainty for both franchisor and franchisee, and will give everyone peace of mind.
Key points in a franchise agreement
A professional franchise agreement should include:
- The identity of the franchisor and the franchisee
- The duration of the franchise, and any renewal rights
- The fee structure
- How the business is to be marketed
- The operating requirements of the business (linking directly with the Operations Manual)
- Legal and regulatory compliance
- The franchisee’s right to sell the franchise
- What happens on the death or illness of the franchisee
- Termination for breach
- Franchisee obligations and restrictions after termination
Franchise Agreements are almost always presented to prospective franchisees as being ‘non-negotiable’, and this is for good reason.
For the sake of fairness and consistency, franchisees should all be on the same contract terms. And in order for a franchisor to be able to police standards of performance and the reputation of the brand, the agreement needs to be robust.
However, it is in the interests of both franchisor and franchisee for the franchisee to obtain independent legal advice on their franchise agreement before they sign up.
A bfa-affiliated lawyer will be able to advise the franchisee on the practical implications of the franchise agreement, and anything problematic or untypical. This helps the franchisee understand the implications of the contract and it gives the franchisor assurance that the franchisee is entering into the agreement with their eyes open.
For expert legal advice on franchising, whether you’re the franchisee or franchisor, get in touch.