What Is A Franchise Agreement

As a franchisor, you lend your brand to your franchisee. It`s a big risk if you don`t protect yourself and your brand properly. That`s why it`s important to establish rules about how your brand looks and sounds, when you should use the trademark`s intellectual property, what advertising can be done, and what the franchisee needs to know about using your trademark. The substantial legal rights and obligations set out in your franchise agreement include: It makes sense to include a preliminary period of, say, six months, during which the franchisor can terminate the agreement relatively easily if the franchisee does not meet and comply with certain objectives and standards. It is often difficult to assess from the initial interview and some contacts with the franchisee whether he will prove to be a competent and successful franchisee. You just finished discovery day and love what you saw in this latest episode of the franchise`s advertising process. You`ve decided that this is the franchise for you. You sit down with the franchisor at the end of the day and he brings the franchise agreement to the table. There are a few things you should know. Several states have also passed laws that define a franchise, and definitions may include certain relationships that do not comply with the FTC`s franchise rule. Definitions should include trademarks, copyright, trade dress, know-how, trade secrets and other intellectual property rights. It should also include a description of the franchise business. Since the franchisor allows the franchisee to use its intellectual property, the definitions should also include the precise use of the intellectual property in which territory and for what period.

A franchise system should have a complete operations and procedure manual. It should be a dynamic annex to the franchise agreement and the agreement should provide for the franchisee to act in accordance with the manual as amended from time to time. This allows the franchisor, if it makes economic sense to grow the business, to do so without having to sign constantly updated franchise agreements. The FTC`s franchise compliance rule requires that the FDD be presented to the franchisor at least 14 days before the agreement is signed. This ensures that the potential franchisee has enough time to review the document and get a lawyer`s review before signing it. The FDD must contain information about the risks and opportunities associated with the purchase of the franchise. Different franchisors offer different levels of education to their franchisees…