What is included in a franchise agreement?

All franchise agreements will have basically the same information. This will include the territory that your franchise will cover. By their nature, franchise businesses trade within a specific location. You should ensure you understand which areas you can and cannot trade within. You can ask your company and commercial solicitor to check this term of the agreement. All franchises are usually set-up for a specific time after which the agreement can be renegotiated, or terminated by the franchisor or by you, the franchisee.

Perhaps the most important component of your franchise agreement will be how much the franchise will cost you. There could be an initial payment followed by subsequent annual payments you must make to the franchisor in order to keep your business. Have your company and commercial solicitor look at this aspect of your agreement in particular detail to ensure there are no hidden costs you are not aware of.

The use of the intellectual property that your franchise contains will also be detailed in your agreement. Any restrictions regarding what can be used in promotions or advertising will be given. Lastly, your franchise agreement should clearly spell out how you can terminate your franchise contract. If you want to end your franchise before it comes up for its usual renewal, this could attract additional costs.

In addition, look for any restrictions that your franchise agreement might place on what type of future business you can start. Some franchisors protect themselves from a franchisee closing their franchise simply to start their own rival business. You will also generally see restrictions about where you can start a future business included in your franchise agreement. Again, seek legal advice from a company and commercial solicitor before you sign a franchise agreement to ensure you are fully aware of your obligations under the agreement.

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