What is the importance of franchise agreements

A franchise agreement is a document that establishes the rules that will govern a franchise transaction between a company and the franchisee. It is a legal document and hence it has to be constructed following certain legal and technical parameters. It must be carefully written as it is a crucial and importance document which will be referred to at every step of the franchise agreement. Some of the ways in which a franchise agreement becomes useful are as follows:

  • A franchise agreement provides a list of the clauses which will govern the establishment of franchise outlets of the main company. Hence, in case of any contention or allegations of malpractice or breach of contract, the offending party can be liable for punishment by referring to the franchise agreement.
  • A franchise agreement also incorporates the necessary information about the contract such as profit sharing, supply of goods, use of unsold goods etc. hence, it has huge documental value and can be referred to if there is the slightest confusion regarding these issues.
  • A franchise agreement also ensures that there is an order and a system to the proceedings of franchise establishment. It provides a record of the franchise transaction to the relevant courts and legal bodies which is extremely useful in case of any malpractice.
  • It also provides the franchise owners with a credible and authentic document that will prove their business arrangement with the parent company. Hence the franchise agreement also serves as evidence of authenticity. It thus is an important document and copies must be possessed by all involved parties.
  • Franchise agreements also provide a framework and a template for the construction of legal documents of this nature. They can be used as points of reference and they can be consulted over and over again.

Category: Sample Agreements

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