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If you are considering investing in a franchise then you will need to become familiar with a whole host of terms, of which franchise agreement is just one. This should be one of the very first terms you become familiar with because it is effectively the document that will govern your business relationship with the franchisor and determine how you are to develop your entrepreneurial goals in the future.

About The Franchise Agreement

No matter which franchise you invest in, you will be expected to sign a franchise agreement because it is the legal document that binds you to the franchise and actually gives you the right to run your own business under it as well. It will detail the obligations that you have to the franchisor just as it outlines the obligations that it has to you as a franchisee.

Legal representatives of the franchisor and the franchisee often draw up franchise agreements. This is to ensure that both parties are treated fairly and have defined legal rights within the agreement. It is not unusual to have one but is actually essential if you want to ensure that you get what you want and need out of your investment. However, you should bear in mind that no two franchise agreements are ever the same. Instead, they will vary from franchise to franchise, although you may find common elements in those produced by several companies.

Essential Information

There are several areas of any given franchise agreement that contain essential information that you need to know if you wish to fully benefit from your investment. Some of them are outlined below:

• Training And Support – This section of the franchise agreement will outline in detail the level of support that you will get as a franchisee. It varies from company to company but you should understand how far the franchisor would go to helping you for the duration of the agreement.
• Territory – Any exclusivity and protections that are guaranteed under the franchise agreement are outlined here. You should make sure that any verbal assurances are documented for legal purposes because the verbal agreement you had may not actually hold up if it is absent.
• Duration And Renewal – The duration of your initial contract and any renewal rights that you have will be fully outlined in your franchise agreement to ensure that both parties are happy with the level of commitment.
• Trademarks And Branding – This section is incredibly important because it will detail how, when, and under what circumstances you can use the trademarks and branding, in addition to any patents, that you have access to. Any flaunting of this section will result in legal action against you, so this has to be clarified right from the start.
• Royalties And Fees – Any initial fees, ongoing fees and royalties that you will be expected to pay will be clarified in this section of the agreement. Any hidden costs must also be clarified to ensure that both parties know exactly where they stand.
• Agreement Issues – Issues that may or may not arise must also be presented in franchise agreements in order to avoid legal proceedings later on. This includes any cancellation of the agreement, under what circumstances either party can walk away, and how disputes are settled, amongst other items. This is as much to protect you as the franchisor.

Of course, franchise agreements are not limited to the information above because the nature of the agreement depends on the industry of the company and its practices. However, every franchise agreement will contain all of the above.

You should always have a legal professional look through the franchise agreement for you before signing it because he or she can negotiate any issues that arise and make you fully aware of what is involved in the business investment that you are making.

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