After opting for a franchise, getting permission, securing financing and finding the right location, you`re probably looking forward to getting into your new business. Before you do so, you must sign a franchise agreement. This key document defines the terms of your relationship with your franchisor. To protect yourself and your investment, take the time to understand the terms of this contract and its impact on your business. Before summarizing the pros and cons of short-term or long-term franchise contracts, I would like to point out that an entrepreneur can become a franchisor for a specified period of time and for certain reasons. There is nothing that requires an entrepreneur who has a business project to build a franchise network. The entrepreneur may prefer to develop his business through the industry model, the company owning the stores or outlets, rather than a franchising model in which the entrepreneur has to deal with a number of different and independent entrepreneurs. The reason the entrepreneur has chosen to follow the franchising path may be because he wants to take advantage of the multiple advantages of the franchised model, whether at the financial or operational level, which allows him, for example, to enter a lucrative market more quickly through the franchising model than if he brings only his own personal and financial resources. These lists are not in themselves a red flag, but if the franchisor prevents you from talking to franchisees who are not on the list, it is a red flag. Franchisors should have nothing to hide and be open to your conversations with anyone you want within the organization. The first source – the franchise itself. It can insert clauses dealing with planning strategies and future ideas.
The second source – the lawyer of the franchise company. Lawyers can insert clauses to protect a company`s future rights, such as. B the distribution of alternative channels of products or services. “A franchisor can call itself a membership or a license, but if those three conditions are met, you enter into a franchise agreement,” Goldman said, noting that some franchise agreements may attempt to disguise themselves as licensing agreements. “A licensing agreement gives you permission to use the name and logo, and that`s it – you don`t get the marketing help or the type of transactions you`d get from a franchise.” You`ve studied the FDD and you`ve talked to other franchisees in the company – and you like what you`ve read and heard. Numbers add up to your lifestyle and family if you have one. They are ready to formalize it and sign the franchise agreement. 6. The franchise agreement may contain additions or restrictions that do not appear to be relevant. These usually come from two sources, both of which help to better evaluate the company.
8. Creates a situation in which franchisees are very familiar with the operation of the franchise system; Territory: Is your franchise an exclusive territory or does the franchisor reserve the right to open other sites nearby? How is your territory determined? Is it the population? Is it based on a map and, if so, to what extent is it detailed? The franchise agreement is a legally binding contract that accurately defines the responsibilities and expectations of the franchisor and franchisee.