Entering into a franchise agreement

- April 8, 2009 < 1 MIN READ

Entering into a franchise agreement

The franchise agreement is a legally binding document spelling out the rights and responsibilities of both the franchisor and franchisee.

Before you sign the agreement you should obtain as much information about the franchise as possible. Consider the following questions:

What are the details of the business?

  • Do you have all the relevant information on the business?
  • What is the track record of the franchisor?
  • What are the franchisor’s current motives for franchising?
  • Does the franchise have a strategic plan and what are the plans for the future?
  • What is the success rate of other franchisees in the same business?

What is included in the sale?

  • Does the sale include the use of business name, products, reputation/goodwill, site location, advertising budget or back-up assistance?
  • What are your intellectual property rights and obligations?
  • What are the terms of sale of goods? Can you purchase them from outside the franchise network?

What are your obligations?

  • What are your occupational health and safety obligations?
  • What are your obligations upon termination of the franchise?
  • Are there guidelines/costs when you sell the franchise?
  • Are the operating procedures, employee responsibilities, and standards spelled out in the franchise manual?

What fees do you need to pay?

  • An initial franchise purchase fee?
  • Franchise renewal fees?
  • Franchise service fees/royalties?
  • Advertising fees?
  • Transfer fees?
  • Training fees?

What to do…