What is Franchise Agreement?

What is a Franchise Agreement?

The Franchise Agreement is a legally detailed document wherein the clauses are mentioned of both franchisor and franchisee to pursue the franchise business. It clarifies all details of the operation and the consent given by the franchisor to the franchisee to operate the business by providing the brand name to the individual or an entity.

A franchise agreement is made for a particular period and at the end of the contract, a renewal process has to be done which we have mentioned in this piece of information.

Guidelines of Franchise Agreement in Franchise Business:

Location of the Set-up: In the Franchise agreement, the geographical location is designated wherein the franchisee can operate the business and with its exclusive rights (as mentioned in legal capacity).

1. Royalty: In the Franchise business, a royalty amount has to be paid by the franchisee to the franchisor as an ongoing amount either paid monthly or quarterly. The Franchise Agreement outlines the royalty structure, the percentage of the total sales to be paid by the franchisee to the franchisor.

2. Validity of the Franchise Contract: The Franchise Agreement outlines the period for which the franchisee can pursue the business under the brand of the franchisor.

3. Franchise Fee to be paid: Franchisee fee has to be paid by the franchisee to the franchisor at the initial stage to become a part of the Franchisor and pursue business under their brand.

4. Support to the resources: The Franchise Agreement outlines the process and ways of training provided to the employees hired to run the business to gain growth.

5. Operational Services: The franchise agreement defines the operational activities to be carried out from the business perspective.

6. The franchisor mentions how the franchisee will function the business and build the brand. Also, points out the outcomes or penalties to be faced due to breach of contract.

7. Intellectual Property and trademark: Outline of the usage of the patents, trademarks, manuals, user guides, core business strategies of the franchisor by the franchisee.

8. Termination Clause: In case either party is unable to meet the clauses as decided and agreed in the franchise agreement at the initial stage under the guidance of legal experts, the contract can be terminated and the detailed points are mentioned in the agreement. The penalties and liabilities of the involved parties are also clearly mentioned.

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