Details to look out for in the franchise agreement
Engaging in the franchise business is the dream of many entrepreneurs. There is financial independence as well as the prospects of being your own boss. It definitely is bound to be a good feeling. A franchise is defined as an agreement where one business contracts another one to distribute or sell its products and services. It is important to note that the contracted business operates in the brand name of the parent company. This contract is governed by the franchise agreement. There has been a lot of contention as to what should be in this document or even its definition. The franchise agreement is a document which defines the rights and obligations of the franchisee as well as the franchisor in relation to the business. It is in this document that you will know the duration of the contract as well as the renewal details of the business. By defining the boundaries of the business, the franchise agreement provides details pertaining to how the relationship could be dissolved or even what would render the contract null and void.
The document is evidently a very integral part of the franchise business because it is the basis on which the whole relationship is built. One thing that you should note about the franchise agreement is that, it varies with different businesses. It is therefore not uniform in its format or in the provisions. However there are several things that you should be on the lookout for in the agreement including-:
• The duration of the agreement as well as details pertaining to its renewal- you should be on the lookout on this particular issue as it will define how long the franchisor-franchisee relationship will be there. In addition, details pertaining to the renewal of the contract are indicated.
• Amount of money to be paid to the franchisor- the franchise agreement determines the amount of initial fees that should be paid by the franchisee as well as royalties. Modes and details of payment are also incorporated in the document as well as the total investment.
• Operational territory- this in particular pertains to the specific territory in which the franchisee will be operating. More often than not, the franchise agreements grant exclusive rights on the territorial.
• Franchisor’s service provision- there are clear guidelines as to the services that the franchisor should provide to the franchisor. These include support and training, services and products as well as commitments pertaining to advertisement.
• Right to site selection- the agreement provides clear guidelines as to who would look for the business site. In most cases, the franchisor reserves the right to approve the site selected by the franchisee or even choose one.
• Rights of selling the enterprise or even transferring- the agreement will incorporate details pertaining to how the enterprise could be transferred. More often than not the franchisor is entitled to transfer rights and has to approve any attempts made to transfer the enterprise.
There are intricate details of the franchise agreement that would necessitate the consultancy of a lawyer who is privy to franchise agreements. Ensure you understand each and every detail of the franchise agreement so that you know where your rights start and end.
