Companies franchise their own corporate businesses for profitability purposes. Corporations or even small and medium-sized enterprises offer franchise opportunities for entrepreneurs and investors who would rather franchise than start their own business. These companies who offer franchise opportunities earn a franchise fee from every entity that signs up.
Restaurants and Hotels are among the most commonly franchised businesses. Whether these are fast food chains or fine dining restaurants, there is always a market for every type of restaurant. Fast food chains tend to be ones that are more often franchised. People just love some mouthwatering hamburgers, juicy hotdog sandwiches, savory fried chicken, crispy french fries, and creamy doughnuts. That is the main reason why McDonald’s, Krispy Kreme, Wendy’s, and Subway are the most popular fast food chains around the world. Also, do not forget the world’s most popular coffee chain, Starbucks, is brewing fresh coffee every day in over 27,000 beautiful stores worldwide.
To make the franchise valid, simple agreements are created so that the parameters and guidelines of the franchisee and franchisor are set and clearly written. This is true not only for franchise agreements, but with other business documents as well. Check out our other business agreement forms which can come in very handy for your own business.
Here are some franchise and multipurpose agreement templates you can use if you are planning to start your own franchise business or simply want to make a franchise agreement document for your own business restaurant.
Listed below are some tips on how to write an effective franchise agreement.
The executive summary is the one most important section of any business document, including the franchise agreement. It shows the legitimacy of one or both parties, especially the franchisor. Most of the time, an executive summary includes the most basic information of the company: company name and slogan, products and services, company address and online portfolio, mission and vision statement, company goals and objectives, financial analysis, and marketing strategies.
The executive summary, as the name suggests, is the summary of what the company currently is and what the company wants to become. It is usually found on the very first page of any business document, mostly in business plans and feasibility studies. The executive summary is placed on the first page to prepare the reader for the document’s subsequent contents while also giving him information regarding the company.
Franchise agreements do not need to become very wordy and lengthy. Since it is an agreement document, the terms and guidelines aside from the executive summary are the only items which need to be incorporated in the franchise agreement. Compared to business plans, feasibility studies, or legal documents, franchise agreements are short. The former requires very extensive study and research, taking up time as well as financial and human resources. Business plans and feasibility studies do not only cover one or two aspects, but the entire business cycle—production, marketing, human resource, finance, and information technology. Legal documents, meanwhile, also take time due to the contents and writing being involved as lawyers and legal assistants are the only persons who can complete those documents.
The terms of the franchise are the most important aspects of any franchise agreement. The terms include the raw materials and other products which will be included in the franchise, the payment terms, and the training of personnel. When companies give out franchise opportunities to third-party investors and entrepreneurs, every aspect of the business (name, products, trademarks, etc.) are included in the franchise package. The franchise package is non-negotiable, meaning if the franchisor does not allow the third party to access or use some parts of the business unit, then the third party should not pursue the franchise. You may also see Shareholder Agreement Templates
Similarly, the payment terms that need to be written down in the franchise agreement are the franchise and annual fees. Most of the time, the franchise fee is non-negotiable, especially for large businesses (in this case, highly popular restaurants that are earning millions in annual revenues). But, for smaller restaurants and even for start-up ones, the franchise fee is negotiable and can be paid out in a number of years. Indicate clearly the payment terms so that the franchisee will have an idea of the computation of the franchise fee, and when and how to pay it. You may also like Service Agreement Templates
Evidently, it is the franchisee who will gain most from the business partnership since he will be operating the business on a daily basis. If the business manages to earn well, then he can gain as much profit or even more as the company selling the franchise. The franchisor will still earn money due to the annual and franchise fee he will be getting. It is better to list down how each party (the franchisee and franchisor) can benefit from the franchise, specifically how each party can earn and expand its long-term success. You may also see Loan Agreement Templates