What Is The Definition Of A Franchise Agreement
Franchise agreements transfer the rights to use a franchisor`s intellectual property and resources to a franchisee for a specified period of time. The rights and allowances assigned to a franchisee are very specific and leave little room for expansion or error. “A franchisor may be called a membership or a license, but if all three of those conditions are met, you enter into a franchise agreement,” Goldman said, noting that some franchise agreements may try to disguise themselves as licensing agreements. “A pure license agreement gives you permission to use the name and logo, and that`s it – you don`t get the marketing help or operating method you`d get from a franchise.” “Franchise agreements are the bible of the franchise industry — they are the most important agreements to govern the relationship between franchisees and franchisors,” said Evan Goldman, a partner at New Jersey-based law firm A.Y. Strauss and president of the firm`s franchise and hospitality practice group. [Read related article: Ultimate Guide to Corporate Franchising] “You want the franchise to look and feel the same, whether you`re entering a venue in New York, Iowa, or Europe,” Goldman said. The content of a franchise agreement can vary considerably depending on the franchise system, the jurisdiction of the State of the franchisor, the franchisee and the arbitrator. In addition, there must be a factual description of the deductible as well as a clear statement of the total funds to be paid, such as. B initial franchise fees, down payments, down payments, prepaid rent on the site and purchases of equipment and inventory. The conditions and deadlines for receiving a refund, as well as their amount, must be clear, as well as the amount of recurring costs such as royalties, rents, advertising costs and rental costs. Any restrictions imposed –. B for example with regard to the quantity of goods or services to be sold, the type of customers with whom the franchisee can trade – the geographical area and whether the franchisee is entitled to the protection of its territory by the franchisor must be discussed.
The duration of the franchise must also be explained in addition to the reasons why the franchisee may be terminated or the franchisee`s license is not renewed after expiration. The number of franchises voluntarily terminated or terminated by the franchisor must be declared. The franchisor must disclose the number of franchises in operation at the end of the previous year, as well as the number of outlets owned by the company. The franchisee must also receive the names, addresses and telephone numbers of the franchisees of the ten points of sale closest to the location of the potential franchisee so that the potential franchisee can contact them to get a realistic perspective on the day-to-day operation of a franchise. While franchisees cannot terminate a franchise agreement prematurely, they may transfer or sell their shares to another party who wishes to fulfill the rest of the contract. One of a company`s most valuable assets is its brand and intellectual property. .