What is a Franchise Agreement


A franchise agreement is one which explains the franchising conditions and consequences in detail. It is a legal deal struck up between two mutually consenting parties wherein one is the franchiser and the other is the franchisee. With the help and support of the agreement, the franchiser bestows certain rights on the franchisee regarding the establishment and operation of a franchise under the franchiser. It is basically an outline of the plans and expectations that the franchiser has for the franchisee. The document serves as an interface between the legal rights assigned to the party and the practical implication of the rights manifested in the sharing of profits and proceeds from it.

The agreement document lays down the pronounced areas of the contract some of which assume great legal significance in milieu of the franchising procedure. These are as follows:

  • The classification of the business organization has to be depicted in the written version indicating whether it is a single-unit or multi-unit distribution. This is required for understanding the structural and functional orientation of the company.
  • The document has to lay down the elements of franchise in specific terms and secure the set of provisos like company logo, trademark, goods, marketing strategies and sale rights that the franchisee is allowed.
  • One very important aspect of the agreement is the fees and investment on part of the franchisee. It is mandatory to contribute a start-up amount before availing the rights of the franchise. The amount of initial and continuing royalty has to be mentioned in the document.
  • The franchises are usually allowed to be set up in a definite place and the franchisee cannot go beyond the stipulated territorial boundary to distribute, sell or promote goods. This has to be clearly indicated besides usual termination policies of the legal relationship and standard practices.

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Franchise Contracts

Category: Sample Agreements

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