Franchise Agreements

Franchise Agreements: A Comprehensive Guide

Download our franchise agreements and obtain legally binding documents that not only govern how a franchisee will run a new business, but also define what is expected from the franchiser.

A franchise agreement template is a document based on all the key steps that a person needs to carry out operations in an authorized franchise location under a company umbrella. A franchise business agreement is used by two main parties, including the party, which will be franchising an established business model. They are called the franchisor. The other party that would agree with the franchise agreement and the terms and conditions of the agreement for creating their franchise is the franchisee. While laying out a franchise agreement, the franchisor has to list out all the needs and requirements to ensure that the franchisee is on board with all the terms to use the brand name. The business could be of any type for which the franchise agreement template can be used. It could be a restaurant or a small store or retail outlet.

The franchise agreement allows the franchisor and the franchisee to ensure that specific guidelines about the relationship are discussed and followed. The franchisor’s role is to set out specific rules that the franchisee must follow while clauses aim to protect the franchisee. Such a document will also help you understand how feasible your franchise is and how much time and money it will take to get going.

The template provides a step-by-step and easy guide to complete your franchise agreement template. You will find all the headings already made, and all you must do is fill in the data as per your company requirements.

How to Use a Franchise Agreement Template

Your Franchise agreement provides a perfect layout for the business franchise ownership you are looking to provide to perfect franchisers. It must be used for a franchisor to get into a business relation with a new franchisee or is selling their franchise. Similarly, it can be operated by the franchisee to own a potential franchise from a potential franchisor for an agreement. This document will also contain important information about the parties or individuals or businesses signing and the respective addresses and contact information. The agreement must enlist the contract’s duration, fee information, and the franchisor's branded marks and copyright. A helpful tool to ensure you have all you need to have an effective franchise agreement is the checklist for basic franchise agreement terms template by Business-in-a-Box. It is a simple 4-page document that can be downloaded in its entirety upon signing up.

Moreover, to use it effectively, both parties must choose various specifications and terms which will determine how the agreement would be carried out, what things will be included in the contract and what terms and obligations the franchisor owes the franchisee and what both parties need to follow for the successful completion of the agreement. You can use the franchise agreement template from Business-in-Box, which will allow you to complete the business deal for a smooth business flow.

Responsibilities of the Owner and the Franchise

There are a few responsibilities that the owner and the franchise must carry out to fulfill the franchise agreement. These responsibilities include:

  • The owner must ensure that the location complies with the already built franchise regarding cleanliness and brand image.
  • He must give all the required documentation and materials to the franchiser.
  • The owner must handle the daily management and operation of the allocated franchise location and its employees.
  • The owner has to fulfill the duty of the upkeeping of the franchise at the said location. He can inspect the place with a notice. He must make the franchise aware of the date and time as well.
  • The agreement will be terminated if any of the above terms are not fulfilled.
  • The franchisee must be in the right name and must have all the power and authority to fulfill this agreement with the owner or the franchisor.
  • The owner must be fully aware of the franchise owners’ legal and personal matters to ensure no terms that can hinder or prohibit the contract’s signing.
  • The franchiser must ensure that the company can provide the franchisee as per the agreement’s terms.
  • The owner or franchisee must duly pay the franchiser to get the franchise’s ownership and operations rights. The payment amount has to be clearly stated in the master franchise agreement template.
  • The owner must also ensure to provide the Company royalties monthly to the franchise owner. If the company cannot pay any royalties and fees during the specified time, the contract will likely be terminated.

What to Include in a Franchise Agreement Template?

You need to consider a few things while you complete the franchise agreement template for your business. In every heading, you need to fill in the data as per the needs of your company. Here are a few titles out of the business template and the overview of what you need to enter in them to make sure that your business plan serves its purpose.

1. AGREEMENT TERM

List out the agreement term, including the period and the date of commencement of the agreement. The year of the contract must be listed on the agreement and must be updated annually.

2. TERRITORY

The land or the territory used for the agreement concerning the product and the area, possessions, distribution rights, and the extent of ownership and the franchisor’s control on the franchisee must be listed here.

3. REVENUE SHARING

The franchisee’s revenue-sharing must be set to a specific percentage set by the franchisee to franchisor [%] to share the net profit. The date for profit distribution has to be mentioned.

4. FRANCHISOR COMMITMENTS

The beginning of this agreement for the number and the location must be listed until the commitment.

4.1. Purchasing. All purchasing requirements for all locations and participating franchises must be listed in this section.

4.2. Missing Products. The franchise owner must list out that if any product is lost, stolen, or otherwise not reasonably accounted for during the agreement, the franchisee will have to reimburse the franchisor for the products in this case.

4.3. Payment. Both parties must agree that if the franchisee cannot pay the amount set for the franchisor’s agreement, the amount will be terminated based on the liquidated damages. If the franchisor is unable to fulfill the number of units ordered by the Franchisee, they will have to pay for each unit they failed to deliver.

4.4. Marketing. In e advertising of products, the franchisee must discuss ts marketing plans and activities with the franchisor, which must follow the franchisor's marketing support policies. This must be stated in this section.

In case of any issue and complication in fulfilling this clause, the contract will be terminated.

4.5. Participating Franchises. In this section, make sure that you address good faith as a franchisor and franchisee to run the franchise appropriately, keeping the company’s name. The financial terms and conditions of the agreement must be fulfilled. Failure to do so will lead to the termination of the contract.

4.6. Placement. In this section, the franchisee will have to ensure in good faith that the commercial franchise is running successfully at the location specified in the contract.

4.7. Packing and Shipping. Here, you will need to address the franchisor, as the packaging will be their sole responsibility, including the duties of shipping products to the franchisee’s locations.

4.8. Returns and Exchanges. List out all the terms under which the franchise will make the returns and the exchanges. This must be very clear in the agreement.

4.9. Location Count. The franchisee must provide a detailed report to the franchiser regarding all current operating franchise business locations. Usually, this report is conducted monthly.

4.10. Demographic Information. The franchisee will provide demographic information to the Franchisor regularly.

5. COMMITMENTS

5.1. Marketing Support The details of the marketing support, in terms of rebates, co-op and MDF programs, sales and rental reporting functions, marketing support funds must be entered in this section by the franchisor, which he will be paying to the franchisee. Failure to comply will lead to the termination of the contract.

6. ELECTRONIC REPORTING

The franchisee must regularly provide the franchisor with an electronic report of its current standing, performance, and weekly summaries.

7. REVIEW

The contract will be reviewed as per the date set by both parties. They will meet in good faith to inspect their agreement on a date and location and check it for further extension or termination. The franchisee will give the franchisor a letter and a date for the contract’s extension or termination. The details of the dates and locations must be entered in this section.

8. TERMINATION

The termination of a franchise agreement is based on the following:

8.1. Material Breach A material breach by a party within the agreement will lead to the termination of the contract. State the material breaches clearly.

8.2. Insolvency and Bankruptcy If any business party uses the creditor’s benefit or a voluntary or involuntary bankruptcy while signing the contract, it will be terminated immediately.

8.3. Failure to Make Payment Failure to pay by either party will lead to the termination of the contract.

9. PUBLIC DISCLOSURE AND CONFIDENTIALITY

9.1. Public Disclosure In this section, add details about the public disclosure of the announcement by the franchise.

9.2. Confidential Information Terms and condition for the confidential information must be added in this section.

10. NO RIGHT TO USE NAMES

In this section, the franchise owner must clearly state that the brand’s name cannot be used without the franchisee’s permission or by any third party.

11. ASSIGNMENT

Here, you will need to address clearly that the license is granted to the franchisee, given the terms are accepted and followed.

12. AUDIT RIGHTS

Auditing rights and the time and location and the period for the audit of the assigned franchise must be stated in this section.

13. FRANCHISOR'S REPRESENTATIONS AND WARRANTIES

Franchisor represents, and warranties must be listed here.

14. FORCE MAJEURE

The "Event of Force Majeure,” or an event that prevents performance, such as an act of God, will lead to the termination of the contract.

15. GOVERNING LAW

The state or the country in which the agreement is signed must be listed in this section.

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