Franchise agreement: A ‘must’ for the future of your business

Franchising has made work easier and business is growing at a breathtaking pace. Franchisees receive all the benefits of franchising and as a result, have a flourishing business. However, before you opt for franchising, a franchising agreement is required.

Generally a franchise disclosure document informs the franchisee about the entire company; its system, it working, profits, sales etc. but, this is not enough, a franchise agreement is crucial. A franchise agreement is a written contract. It is the most integral part of franchising. It is signed by the franchisor and the franchisee binding them into a franchising contract. It explicitly lays down the outlines of the business to be carried out by the franchisee and the dos and don’ts. Here are the key items to look for:

• The agreement lays down the specific regions for conducting business by the franchisor. The franchisee has to carry its operations within that region.

• The advertising and marketing details have to be approved by the franchisor such as, the ideas, frequency, presentation and material of the franchisee.

• The franchisee has to pay the franchising fee, other investments and royalties to the franchisor as per the rules and regulations.

• It also mentions the term and renewal of the agreement. A franchise may last between 5- 20 years and can be renewed too.

• It also mentions the services like advertising, guidance, support and other services to be provided by the franchisor.

• Franchisors hold the selling and transferring rights. They can approve or refuse the franchise.

Franchise agreement may differ but have the same content. In addition, hiring a franchise attorney may be suitable to avoid future problems.