The following excerpt is from The Franchise of Rick Grossman Bible. Buy it now on Amazon| Barnes and Noble | iTunes | IndieBoundThe franchise agreement is the contract between you and the franchisor, but it is not a “standard” or “form” agreement. The format of the contract differs from one franchise system to another. “Every franchisor is a little different because every brand wants to have something different from its franchisee,” Goldman said. The franchise agreement must deal with some basic elements, including, but not limited to: Key Takeaway: Most (but not all) franchise agreements last 10 years. Make sure you know the penalties for breaking an agreement. Franchise agreements explicitly grant franchisees the right to use certain brands, such as logos or slogans, in a particular way. Anything outside of these explicit parameters, or something that is not explicitly mentioned in the agreement, is not permissible. The agreement must be adapted to each franchise concept. There is no “One Size fits all” format.
A custom franchise agreement, professionally developed, will protect your business, ensure the safety of franchisors and franchisees and ensure the safety of everyone. For competent legal advice for franchising, whether franchisees or franchisors, please contact us. All franchise agreements require the franchisee to have insurance to cover its activities. In all cases, each franchisee`s insurance policy requires the franchisor to be designated as “additional insured,” meaning that the franchisor has the same coverage as the franchisee, although the franchisor does not pay for the coverage. It is a kind of catch-all section of the franchise agreement, which contains a so-called “boilerplate” language, which means that it is “usual” for such a language to be included in each contract. In virtually all franchise agreements, you can see agreements that include mergers, changes or changes, non-waivers, state-specific addendums and more. Most franchise agreements give the franchisor the opportunity, but not the obligation to exercise an initial denial of the rights of the franchisee`s business – in the event that the franchisee attempts to transfer the transaction or the first right to acquire the franchisee`s assets at the time of the expiry or termination of the franchise agreement. “The goal is to keep the agreement between franchisors and franchisees as balanced as possible,” Goldman said. Read and verify this document and have it verified by legal advisors with franchise experience. You want to be informed before signing a franchise agreement. Like a marriage, you want this relationship to be long.
As stated in the Grant of Franchise section, the franchisor only issues a temporary license to the franchisee. Most franchisors will force this understanding by adding a specific language identifying each item that constitutes its proprietary, confidential and commercial information, and then indicating the restrictions imposed on the franchisee`s right to use such information.