Franchise Agreements

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Franchise Contracts and Licence Agreements

How a franchise agreement is setup depends on the type of franchise being bought and sold. Many countries have specific laws on franchising and what is allowed in the franchise agreement. There will definitely be provisions in the franchise agreement that will have a direct impact on how you run your business.

Royalty Payments
These are payments that have to be made to the franchisor. The amount of the payment is normally based on the weekly or monthly income from sales of the franchisee’s business.

Are you a business owner and want to start franchising, or do you want to purchase a franchise from an existing organization? Regardless, if you are entering a franchise relationship, you will need franchise attorneys to setup the franchise agreements and other legal documents. The franchise relationship between a franchisor and franchisee will mostly be controlled and governed by a franchise agreement. Depending on the franchisor or the type of franchise business, the franchise agreement may regulate all business aspects such as store signage, furniture and decor to where the shop must be located.

Franchise Location
The franchisor may choose the location of your store or require to approve the site selected by the franchisee. The process of relocating might be more complicated due to the franchisor’s involvement.

Franchise Design

The franchisor may require a franchisee’s outlet to look the same as all the other outlets which forms part of the franchise group. This includes the furniture, signage, menus and uniforms.

Franchise Products
The franchisee may not have control over the goods or services that are sold. This restriction guarantees that the franchise name, products and services remain identifiable by the public.

Franchise Operations
Franchise agreements should typically specify the manner and method of operations, business system requirements, suppliers, and advertising specifications.

Franchise Insurance
The franchisee may be required to obtain insurance for the business as specified in the agreement, including insurance against loss by fire and natural disaster, and liability coverage for any injuries suffered by customers on the franchise premises. The franchise agreement could specify the minimum amount of the insurance required.

Franchise Duration
Franchise agreements may be for fixed terms or a specified amount of years. Once the franchise agreement expires, the franchisor may offer the franchisee a renewal, however, in order to protect the interest of the franchisee it would be advisable that the franchisee negotiates a right to renew when signing the initial agreement.