As part of the franchisor that uses the franchisor`s brand, the franchisee pays upfront and current franchise fees to the franchisor. Spelling these fees in advance is important for both parties, as it will help the franchisee determine whether they can afford to enter the franchise – or whether they need to seek franchise financing to cover costs – and whether the franchisor has created a sustainable business model. If both parties are satisfied with the terms of the franchise agreement, they will sign and you will be officially in business together. The franchise agreement will be part of the franchise disclosure document. The franchise agreement is essentially a legal document between the franchisor and you (the franchisee). This is a legally binding agreement. It explains in detail what the franchisor expects of you as a franchisee, in the way you operate every facet of the business. There is no standard form of the franchise agreement, as the terms and methods of the business vary considerably from different franchises, depending on the type of business. As an aspiring franchisee or franchisee, the franchise agreement is the most important document for your franchise investment. If something is promised to you by a franchisor and you rely on that promise, it must be included in the franchise agreement or a change in the franchise agreement. To learn more about buying a franchise and the due diligence steps to evaluate, click here.
Key approach: When an agreement has a pricing structure, authorizes the use of trademarks and provides a marketing system and/or modus operandi, it is automatically considered a franchise agreement. Other specific provisions may be introduced depending on the reflection negotiations. Territories are important to limit market saturation. A single franchise will find it more difficult to compete in oversaturated territory. Remember your significant investment in opportunity. How would you like you to have paid hundreds of thousands of dollars to open a franchise, just to find out that the franchisor allows another franchise just a quarter of a kilometre away? The termination is usually due to the non-payment of a deductible tax, the declaration of insolvency or the failure to comply with the necessary repairs on the premises.