Things to Consider in a Franchising Agreement

The importance of a franchising agreement as a legal document cannot be overstated. It is the most important legal document that both franchisor and franchisee have to sign. The underlying focus of this document is to bind the franchisee to follow specific instructions that are given by the franchisor. Most of the franchisors try to put concise and detailed guidelines in this document and franchisees try to make the instructions as much flexible as they can. So, a franchising agreement is in fact a place of give and take for both parties and for this reason it becomes the focal point of their attention.

There are certain things that you need to consider while working on a franchising agreement:

  • There are some terms in the agreements which are not negotiable at all. However you can take a good look on the terms and conditions to figure out anything strange about them.
  • The franchisors have the right to impose restrictions on certain brands that franchisees cannot sell in the franchise.
  • A special clause in the franchising agreement makes it sure that proper advertisement of products and services is maintained by the franchisees. However you can negotiate the percentage of advertisement that you can held responsible for.
  • Termination of contract under severe negligence is also mentioned in the document.
  • Under the clauses of franchising agreement, you can even decide about the terms and conditions related to the future transfer of the franchise to another party.
  • To fully grasp the matter it is usually recommended to go for an attorney. However now a Franchise Operations Manual is available which is prepared by expert attorneys for the convenience of franchisors and franchisees.
  • Moreover you can quickly prepare the related FDD document with the help of Franchise Disclosure Document (FDD) Template. This template comes with fully customizable Microsoft Word format document.
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