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A Franchise Agreement, also sometimes called a Franchise Business Agreement, is a document between two main parties, the party that will be franchising out their already well-developed business model, called the franchisor, and the party that will be agreeing to certain terms and conditions in order to create their own franchised business based on that business model. In a franchise agreement, the franchisor lays out the expectations and requirements for a franchisee to run a business under their brand name. It can be any type of business; restaurants or small retail outlets are often run as franchises.
Within these agreements, the franchisor and the franchisee each outline their expectations for behavior and agree to the bounds of the relationship between them. Mostly, it is the franchisor describing rules the franchisee must follow, but there are also certain portions of the agreement that relate to the protection of the franchisee.
A Franchise Agreement helps the parties delineate the most important details of their relationship: things such as a description of the franchisor's business, quality control standards, and of course, fee information for the franchisee. A good Franchise Agreement will also have both parties covered in case anything goes wrong: things such as dispute resolution and governing law should be included.
How to use this document
This document should be used for a franchisor about to enter into a business relationship with a new franchisee or for a franchisee looking for a document to present to a potential franchisor for agreement. In this document, pertinent identifying details will be included, such as whether the parties are individuals or businesses, and their respective addresses and contact information. Information on the most important characteristics of the agreement between the parties will also be included, like duration of the agreement, fee information, and even how the franchisor's branded marks and copyrights should be treated.
The parties will be able to choose several specifications for how the agreement should be formed, including things like what obligations the franchisor owes the franchisee, if any. This Franchise Agreement is a robust document that will help ensure the relationship between the franchisor and franchisee flows smoothly.
Franchise agreements in the United States are subject to both Federal laws and specific state laws, which cover general contract principles like formation and mutual understanding. The Federal Trade Commission has a rule called The Franchise Rule, which covers certain disclosures which must be made to franchisee before the franchisee signs an agreement. There are several states which mandate The Franchise Rule, requiring notice, filing or registration of a franchisor's disclosure document, called a Franchise Disclosure Document. They are California, Connecticut, Florida, Hawaii, Illinois, Indiana, Kentucky, Maine, Maryland, Michigan, Minnesota, Nebraska, New York, North Carolina, North Dakota, Rhode Island, Virginia, Washington, Wisconsin, Oregon, South Carolina, South Dakota, Texas, and Utah. The requirements in each of these states differ as to whether registration is required, or notice, or filing, and some may have additional specific requirements.
Please be aware that this Franchise Agreement is only an agreement and does not contain the required disclosure document under The Franchise Rule.
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