Finance:Franchise agreement
A franchise agreement is a legal, binding contract between a franchisor and franchisee. In the United States franchise agreements are enforced at the State level. Prior to a franchisee signing a contract, the US Federal Trade Commission regulates information disclosures under the authority of The Franchise Rule.[1] The Franchise Rule requires a franchisee be supplied a Franchise Disclosure Document (FDD) (originally called Uniform Franchise Offering Circular (UFOC)) prior to signing a franchise agreement, a minimum of fourteen days before signing a franchise agreement.[2]
Once the Federal ten-day waiting period has passed, the Franchise Agreement becomes a State level jurisdiction document. Each state has unique laws regarding franchise agreements.
A franchise agreement contents can vary significantly in content depending upon the franchise system, the state jurisdiction of the franchisor, franchisee, and arbitrator.
It overall provides the investor with a product, a branded name and recognition, and a support system.
A typical franchise agreement contains
- Franchise Disclosure Document (FDD)
- Disclosures required by state laws
- Parties defined in the agreement
- Recitals, such as Ownership of System, and Objectives of Parties
- Definitions, such as
- Agreement, Territory Area, Area Licensee, Authorized deductions, Gross Receipts, License Network, The System Manual, Trademarks, Start Date, Trade name, Termination, Transfer of license.
- Licensed Rights, such as
- Territory, Rights Reserved, Term and Renewal, Minimum Performance Standard
- Franchisors Services, such as
- Administration, Collections and Billing, Consultation, Marketing, Manual, Training and Vendor Negotiation
- Franchisee Payments, such as
- Initial Franchise Fee, Training Fees, Marketing Fund, Royalties, Renewal fee, and Transfer fee
- Franchisee Obligations, such as
- Use of Trademarks, Financial Information, Insurance, Financial and Legal responsibility
- Relationship of Parties, such as
- Confidentiality, Indemnification, Non-Compete clauses
- Transfer of License, such as
- Consent of franchisor, Termination of license, Termination by licensee
- Other provisions
- Governing law
- Amendments
- Waivers
- Arbitration
- Severability
See also
- American Association of Franchisees and Dealers
- Franchise consulting
- Franchise Disclosure Document
- Franchise fraud
- Franchise termination
- Franchising
- List of franchises
- The Franchise Rule
- U.S. Securities and Exchange Commission
References
Terms and conditions of franchise agreement
- ↑ "Consumer Information". ftc.gov. http://www.ftc.gov/bcp/edu/pubs/business/franchise/bus70.pdf. Retrieved 25 January 2015.
- ↑ "Buying a Franchise: A Consumer Guide". ftc.gov. http://business.ftc.gov/documents/inv05-buying-franchise-consumer-guide#2. Retrieved 25 January 2015.
External links
- International Franchise Association
- American Association of Franchisees and Dealers
- Franchise Brokers Association
- FTC Franchise FAQ Page
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