What Is a Franchise Agreement?
A franchise agreement is a legal agreement that lists the basic agreement of the franchisor and franchisee and the franchisor's conditions for the franchisee. It also lists the obligations of both franchisor and franchisee. One of the purposes of a franchise agreement is to protect the rights and property of a franchisor and to ensure consistency as to how the brand operates. The contract also must be modifiable for the franchisor to make some changes reflecting on the circumstances. A franchise is not a partnership nor cooperation but rather a license that lets the franchisee to use the name of the franchisor's business. In that case, you are allowed to charge a fee toward a franchisee in using your trademark. In addition, you can also make money from your franchisee's business.
How to Write a Franchise Agreement
A franchise agreement is also considered as a business agreement because it involves two parties that set the terms and conditions of their business. Like in retail agreement, making a franchise agreement also comes with great responsibility to maintain and consistently obey the stated terms of the agreement. It is a long, complicated, and formal form of agreement, and with that, we are here to help you. Here are steps on how to write a franchise agreement thoroughly:
1. Look for Suitable Template
Letting your lawyer draft your agreement is costly. For you to save, there are available templates that are downloadable and customizable. Look for templates that have a suitable theme for your simple agreement. There are templates that are designed as a general franchise agreement wherein it is flexible and applicable nationwide. According to the U.S. Bureau of Economic Analysis, franchise fees have an overwhelmingly (34 to 1) positive impact on America’s trade balance. With that, one must comply a nationwide agreement in order to start franchising.
2. Provide Business's Required Information
Market your business by providing descriptions that are on-trend. Indicate as to what your brand is known for and provide your company logo. You can also include statements that prove that your business is in good shape and successful. Brag about why it is good to franchise in your business. In that way, it justifies the fees indicated in your contract.
3. Set the General Standards
Specify your trademark or trade name as to the extent of how it would be used and identified. Make sure to indicate your ownership of the trademark and that they only have the license to use it. Also, the franchisee must label themselves as a license holder to avoid them in making changes in your trademark. The franchise facility also must have standards. It must contain maintenance, condition, and location.
4. Secure the Confidentiality of Data
In making the franchising, there are certain confidential pieces of information that will be shared. Make sure to require them the guarantee of the confidentiality of the pieces of information and must not be used in other purposes other than the franchise. Set a standard amount if the franchisee will violate the confidentiality agreement.
5. Address the Transfer Rights
Mostly, the legal agreement will state the transfer agreement rights to the franchisee, and it must be notarized for it to be legal. Ensure the capability of the franchisee to handle the franchise and make sure they made it to your standards. Also, the transfer fee will be indicated to cover the transfer cost of the franchise. To have a smooth transaction, one must consider each other.
6. Make the Contract Legal
After all of the complicated steps, the final step is to be done together with your lawyer. Both parties must be present in order to sign the franchise contract. If your designated lawyer will approve the agreement, make sure to secure a copy on your own.