Why Franchising Agreement Is Important

A franchise agreement is a legally binding agreement between the parties to a franchise relationship. To take over a franchisee as a franchisee, you sign a franchise agreement. Territories are important to limit market saturation. A single franchise will have a harder time competing in an oversaturated area. Think about your significant investment in the opportunity. How would you like you to pay hundreds of thousands of dollars to open a franchised outlet, only to find out that the franchisor allows another franchise only a quarter mile away? A franchise agreement is a legally binding document that describes a franchisor`s terms and conditions for a franchisee. Each franchise is subject to these Terms, which are generally set forth in a written agreement between both parties. However, we strongly recommend that all franchisees have their franchise agreement reviewed by a franchise lawyer. This is also promoted by the British Franchise Association (bfa). A review of the franchise agreement will give you a clear understanding of the terms of your contract and your legal obligations. A franchise lawyer will also ensure that the terms of the contract are appropriate and ethical. Franchise agreements describe all rights to transfer the franchisee`s share of ownership of the franchise relationship to a buyer. Sometimes franchisors retain the right of first refusal, which means they have the first chance to buy your business if you decide to sell.

A franchise agreement is a membership agreement, which means that it is created by a party with greater bargaining power using standard form provisions. However, it is sometimes possible for franchisees to negotiate smaller points such as a payout plan for the initial franchise fee. Potential franchisees often want to know if they can negotiate the franchise agreement. Technically, the answer is yes. You should always try to negotiate. However, be prepared for the franchisor to refuse. The nature of a franchise system is such that the franchisor tries to keep all requirements uniform. As we have noted, the franchise agreement may seem one-sided, but it is actually designed to benefit not only the franchisor, but also anyone with a personal interest in the business. In this context, most franchise agreements are not negotiable. For most franchisors, their brand will be their most valuable business asset.

It makes it possible to reproduce their concept in different territories while remaining coherent and instantly recognizable by customers and the general public. The franchisor must therefore ensure that its most valuable asset is legally protected. This is the purpose of the franchise agreement. As a franchisor, your franchise agreement serves as the primary and most important legal document that governs and defines the legal relationship with your franchisees. .