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Business Franchise Agreement

Franchise agreements (FA) in America are a set of documents between the franchisor and franchisee which tell about the duties, rights, and obligations of both parties. Once both parties sign then it will become a legal binding contract (LBC) between the parties i.e. franchisor and franchisee. At the time of an initial submission of business request to the franchisor, the franchisor will give a model copy of the franchise agreement to the franchisee along with disclosures to read, understand, and approve. As it going to be an LBC, there are so many clauses which you may not be familiar with. Hence it is always good to hire attorneys who are specialized in contract law or franchise law and take their advice and opinion before signing any documents.

As of now there is no standard form for a franchising business agreement. Participation, responsibilities, duties, obligations, training, assistance, availability, duration, financial implications, terms, conditions, policies, services, products, area operations, territories, transferability, salability, settlement of disputes, terminations, renewal, and methodology vary from franchisor to franchisor.

The most common terms and conditions in the franchise contract:

  • Applications fee
  • Initial deposits
  • Inventory cost
  • Operational cost
  • Project cost
  • Training cost
  • Royalty fee
  • Advisement fee
  • Developmental cost
  • Technology fee
  • Accounting fee
  • Violation fee
  • Sale of product
  • Methodology of operations
  • Usage of logo
  • Usage of trade mark
  • Usage of intellectual properties
  • Product selling restrictions
  • Non-competition clause
  • Trade secret clause
  • Franchisor assistance clause
  • New product clause
  • Territorial clause
  • Expansion clause
  • Resale clause
  • Transfer clause
  • Termination clause
  • Violation clause
  • Breach of contract clause
  • Employee protection clause
  • Renewal clause
  • Non-renewal clause
  • Reposition cause
  • Buy back clause
  • Vendor clause
  • Purchase clause
  • Dress code clause
  • Privacy clause
  • Option to buy clause
  • Lease clause
  • Maintenance clause
  • Day to day operational clause
  • Franchisor rights
  • Franchisee rights
  • Mediation clause
  • Method of settlement clause

These are the common terms and conditions in franchise agreements (FA) however in realty there are other terms and conditions present which vary from franchisor to franchisor. All these you will see in the franchise discourse documents (FDD)/uniform franchise offering circular (UFOC). As this is a legal binding contract (LBC) it is very important for you to hire an attorney and accountant to get their advice and opinion before you sign any paper or deposit any monies. Before singing, compare and make sure that the FDD/UFOC offerings match with agreements.

To know more about franchise agreements (FA), or if you have further questions about franchise agreements, or need assistance with franchise agreement issues, please contact us at help@bizworldusa.com or 415-234-8833 and one of our approved third-party professionals will guide you.