A Franchise agreement is an agreement between a business (Franchisor) and a ‘new partner’ of the business (Franchisee) who is normally paying a fee to have the right to sell goods or services under the same. A good franchise agreement should clearly outline the rights and obligations of the franchisee and the franchisor.
The essential terms of the agreement as a minimum, as defined in the code of ethics, should include:
- Rights granted to the franchisor
- Rights granted to the individual franchisee
- Services an/or to be provided to the individual franchisee
- Obligations of the franchisor
- Obligations of the individual franchisee
- Payment terms for the individual franchisee
- Duration of the agreement (which should be long enough to allow individual write off their initial investments into the franchise)
- Basis for any renewal of the agreement
- Terms by which the franchisee can sell or transfer the business
- Provisions of rights to the franchisor’s name for use by the franchise, i.e., trade name, trade mark, service mark, store sign, logo or other identification
- The franchisor’s right to adapt the franchise system
- Terms of termination
- Provisions for returning of assets in the event of termination
The agreement is essentially a list of the rights the Franchisee is granted by the Franchisor as well as obligations of both parties and provisions for the end of the agreement.
It will also generally cover locations, assets, payment, fees, sales and multiple ways to end the agreement either by completing the duration or termination.
You may download this free sample franchise agreement contract and use it as you wish: