Franchise Agreement

A Franchise Agreement is a legal, binding contract between a franchisor and franchisee, enforced in the United States 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. The Franchise Rule requires a franchisee be supplied a Uniform Franchise Offering Circular (UFOC ) or Franchise Disclosure Document (FDD ) prior to signing a franchise agreement, a minimum of ten days before signing a franchise agreement.

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 in content depending upon the franchise system, the state jurisdiction of the franchisor, franchisee, and arbitrator.

A typical franchise agreement contains

  • Uniform Franchise Offering Circular (UFOC)or FDD 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
  • Franchisee Payments, such as
Initial License 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
  • Transfer of License, such as
Consent of franchisor, Termination of license, Termination by licensee, Termination by licensee
  • Other provisions
  • Governing law
  • Amendments
  • Waivers
  • Arbitration
  • Severability

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