Franchise Agreement

All states
Preview
4.7 (14 reviews)
Updated May 10, 2023
~ 11 pages
PDF
27.6K downloads
A franchise agreement format is a legal agreement between a franchisee and a franchisor. This written notice explains things like how the franchisor grants the franchisee the right to use their brand in their hometown in exchange for a franchise fee. Tailor this franchise agreement template to your needs on Lawrina and get a final document in PDF format.
Paper titled "Franchise Agreement"; woman talking to a man and standing near the cafe building

A franchise agreement stands as a binding legal contract between the franchisor and franchisee parties. This legal document turns the spotlight on the terms and conditions that oversee how the franchisee runs the business and uses the franchisor's intellectual property, including trademarks, logos, and business models. 

Any business venturing into franchising, either as the franchisor or franchisee, will benefit significantly from a robust franchise agreement. This type of document serves as the backbone of franchising, providing a roadmap for operational guidelines, financials, and other significant aspects pertinent to running a franchise.

When to Use a Franchise Agreement

Usually, a franchise agreement comes into action whenever a franchisor grants a license to a franchisee. The agenda includes using their business model, brand, and operating systems. This includes a range of businesses, from food chains to bookstores. 

For instance, an entrepreneur decides to buy into a restaurant chain. In this case, they would sign a franchise agreement with the franchisor. This agreement draws out the operations, marketing, and quality control guidelines, among other details. Therefore, there's a need for a suitable franchise agreement template to guide in developing a comprehensive contract.

Parties

  • Franchisor –– This is the individual or entity that owns the intellectual property, branding, and business model that distinguishes a specific franchise. The franchisor is responsible for entrusting these rights to the franchisee as per the conditions laid out in the franchise agreement. Throughout the agreement term, the franchisor provides the franchisee with the necessary support and resources to run the franchise efficiently. When the contract terminates or expires, if no further renewal takes place, the franchisor's intellectual property rights revert back to them exclusively.

  • Franchisee –– It is the individual or entity obtaining from the franchisor the right to operate a franchise. Under the franchise agreement, the franchisee is responsible for adhering to the established business model and maintaining the brand image. The franchisee has operational rights for a specified term, predominantly pegged on fulfilling stated conditions, such as paying periodic franchise fees and royalties and maintaining quality controls. Upon successful completion of the agreement term, the franchisee may choose to renew the agreement under new or similar conditions, or they might decide to discontinue the franchisee relationship, reverting the intellectual property rights to the franchisor.

Key Terms

  • Protected Territory: This term defines the geographical zone within which the franchisee has exclusive rights to operate, protecting them from competition with other franchisees of the same brand.
  • Franchise Fee: This term outlines the initial fee that a franchisee must pay to the franchisor in exchange for the rights to use the franchisor's brand and business model.
  • Royalties: Typically, these are ongoing payments made by the franchisee to the franchisor, usually a percentage of the franchisee's gross sales.
  • Default and Cure: These terms outline what constitutes a breach of the agreement, the consequences, and potential remedies for such a breach.
  • Term of Agreement: This refers to the duration the franchise agreement will be in effect, including conditions for termination or renewal.

How to Write a Franchise Agreement

A franchise agreement sets an essential legal framework that dictates how the franchisor and franchisee interact. It specifies their rights, responsibilities, and the terms guiding their partnership and can be prepared using credible online resources or by employing professional legal advice.

Here's how to draft a sample franchise agreement that meticulously serves both parties:

Franchisor
  1. Include an in-depth definition of the franchise itself, detailing what it encompasses specifically. This could involve diving into descriptions of the type of services or products on offer.
  2. Set clear franchising region boundaries. The outlined territorial borders should assert the areas where the franchisee is allowed to operate.
  3. Present a comprehensive disclosure of all intellectual property that the franchisee is permitted to use in their operation.
  4. Specify the training and ongoing support to be provided to the franchisee, detailing the expected standards and operational specs.
  5. Pinpoint the franchisee's financial obligations, detailing the initial investiture, royalties to be paid, and any additional expenses.
Franchisee
  1. Document your legal identification information. This generally includes your name and contact details.
  2. Incorporate the terms of the agreement, mentioning the duration of the partnership and terms for termination or renewal.
  3. Establish any purchase or lease agreement related to the physical location of your franchise.
  4. Define a defaulting and remedial clause, stating the causes for contract violation and the possible remedies for such infractions.
  5. State an arbitration clause dictating how disagreements or disputes between the franchisor and franchisee would be settled. 

Each party should duly scrutinize the franchise agreement with proper legal guidelines to safeguard their interests. It's crucial to remember that achieving a mutual agreement on paramount elements of the document, like the dispute resolution process or financial obligations, is vital for a smooth-running franchising partnership.

In conclusion, a franchise agreement plays a pivotal role in maintaining smooth franchising relationships. Proper understanding and drafting of these agreements are crucial for both the franchisor and franchisee. Using franchise templates from trusted sources can streamline this process, ensuring all aspects of your unique franchising business arrangements are aptly followed.

Legal Disclaimer

Please note that Lawrina does not provide any legal services. The information on Lawrina’s Site and its downloadable content, including legal articles and templates, shall not be considered legal advice and is not guaranteed to be correct, complete, and up-to-date. If you require legal advice on your issue, we recommend you contact a qualified attorney licensed in your state. You personally assume full responsibility for any consequences, damages, and costs associated with your use of any content of Lawrina Services available on Lawrina’s Site. 

By using Lawrina’s Site you agree with mentioned above and give your irrevocable consent to comply with and to be bound by the provisions of Lawrina Service terms.

Also Read

Template Benefits

Create your Lawrina Templates account in a few clicks. Manage and use purchased templates from your dashboard whenever you need.
5-Minute 
Creation
Take five minutes only to answer simple template-specific questions.
Customizable 
Legal Documents
Lawrina's templates are easy to edit, print out, download, and share with the parties.
Compliance 
With State Laws
Wherever you are in the U.S., you can always introduce state-compliant legal documents.
Regular 
Legal Revision
Lawrina legal professionals constantly update our templates to ensure you’re armed with a legally binding document.

Frequently Asked Questions

What are the three conditions of a franchise agreement?

There are many conditions of a franchise agreement, but primarily they stipulate:

  1. That the franchisee has the right to use the trademark at a location agreed upon ahead of time for the duration of the agreement.
  2. That the franchisee will pay certain fees and payments to the franchisor and perform other specific duties.
  3. That the franchisor owes certain responsibilities and obligations, such as training and support, to the franchisee.
How long is a franchise term?

A franchise term can be whatever you specify in your legal documents. Most of the time, a business relationship is set for ten years. However, you are completely free to decide on a longer or shorter franchise term, as long as it's agreed upon by all parties involved.

What does a franchise lawyer do?

A good franchise lawyer will look over a franchise agreement template to check on things like governing law or competitive business rules in the area. If you are using franchise agreement templates, you might specify different sections that weren't included in the franchise agreement sample, in which case an attorney or law firm can review what you wrote and ensure it covers your needs. If there has been a material breach, and the franchisee has violated business operations, reasonable attorneys fees might cover an inspection of your franchise agreement draft and litigation to pursue compensation for the violation.

We use cookies to improve our website's work and deliver better services.