What is a franchise agreement?
A franchise agreement is the most important document of the franchisee-franchisor relationship. This document legally binds both parties, laying out the rights and obligations of each. Franchise agreements detail: • The duties of the franchisor and franchisee with regard to the franchised business • The training and operational support the franchiser will provide – and at what cost • Territory restrictions or exclusivity arrangements • The franchisee fees • Intellectual property management matters • Tax issues • Franchise sale or transfer restrictions • Advertising and branding policies • Franchisee termination issues • Dispute settlement procedures • Operating practices • Cancellation provisions • Attorney fees. A sample franchise agreement must be attached to the franchise disclosure document. If the FRANCHISOR makes unilateral, material changes to the sample franchise agreement, a prospective franchisee is then entitled to review the changed agreement for at least seven calendar day
A franchise agreement allows an entity, such as a cable company, to use the public rights-of-way under certain terms and conditions within a franchise area, such as Hoover city limits. From franchise agreement to franchise agreement, those terms and conditions may be many and varied. Local governments usually enter into franchise agreements with utility, telecommunications, and cable companies. Because federal laws have reduced the role of the federal government in regulating cable operations, local franchise agreements are now the major source of government regulatory authority today.
Federal laws and the laws of many states require that every franchise company submit to prospective franchisees a document that specifies, in detail, the terms under which the franchisor and franchisee will do business together. This contract is commonly known as the franchise agreement. By establishing standards of operation, the agreement helps to both alert a franchisee as to what is expected of him or her, as well as to ensure system-wide uniformity throughout a franchise. Perhaps, no one part of the franchise development process is as important to the ultimate success of the franchise program as the drafting of the franchise agreement. It is essential that an attorney, who understands franchising and is familiar with the franchisor’s business, prepare this agreement (see Francorp Consulting). It’s equally important for the franchisor to personally participate in the development of the agreement, because he or she is the most knowledgeable about the circumstances and requirements o
