What Are Franchise Legal Agreements?
When starting a franchise business, legal agreements are the a binding contract between a franchisee and franchisor which sets the premises of their mutual beneficial relationship. This is a key document about the franchisors licenses rights to intellectual property in-exchange for payments to start a franchise.
Why Franchise Legal Agreements Are Important
Franchising also involves in-depth legal agreements that must be negotiated carefully while taking into consideration the legal rights and obligations of all parties. These are legally binding agreements and the rules and regulations of all rights and obligations for parties to participate, follow and adhere to. We’ll explore important topics of the legal agreements involved in franchising and provide tips for navigating this process successfully.
The franchise legal agreement outlines the terms of the relationship between the franchisor (the company granting the franchise) and the franchisee (the individual or entity receiving the franchise). The franchise legal agreement includes detailed information about the franchise fee, licensing, trademarks, financial obligations, dispute and resolution, termination process and operating standards. This 20-30 document strictly outlines the key points between each party and the standards that need to be followed.
Key Franchise Legal Agreement Points
- Disclosure
- Trademark and Intellectual Property
- Advertising
- Duration
- Territory
- Fees & Expenses
- Termination
- Non-Competes
- Negotiation
- Reviewal
How To Scale Franchise Growth With Legal Agreements
All aspects of the franchise legal agreement outline what each party has to follow. One of the most important aspects of the franchise legal agreement is the franchisor’s intellectual property rights. This grants the franchisee a license right to use its trademark, logo, trade secrets and other intellectual proprietary information in exchange for franchise fees. Any breaches of intellectual property is a case of copyright infringement and can potentially have lawsuit action.
Once franchise intellectual property has been sorted, the next action item to be sorted is the franchise operations manual. This document outlines the franchisor’s system and standards of the operations of the business, who will take care of what and how it will be done. This includes everything from marketing and advertising, training and hiring, purchasing and all other key aspects of the business. Business operations are essential for franchise growth and the operation standards are obligations to help ensure consistency and quality across all locations.
Navigating the legal agreements involved in franchising can be complex, especially for first-time franchisees. Here are some tips for navigating the legal agreements involved in franchising successfully:
Step by Step Franchise Consulting Action Items For A Legal Agreements
Research: Before drafting your legal agreements, do your own due diligence and research the franchisee thoroughly. Each party should check the other party’s reputation, financial stability, and track record of success. Key information to look for it length of time in business, years of experience, operating standards, amount of training support provided.
Legal Advice: There should always be an experienced attorney that can be consulted to help navigate the legal complexities of franchise legal agreements that the average individual may not be familiar with. It’s important to involve a third party who is familiar with the process and understands the in’s and the out’s of franchising, unforeseeable circumstances as well as can provide other resources.
Negotiation: Franchise legal agreements are usually written by the franchisor for the purpose of benefiting themselves in the long-run. However, the agreement should each be reviewed to ensure fairness and an equitable relationship. Overall, each party should negotiate the agreement to have a mutually beneficial relationship and long-term success.
Obligations: The franchise legal agreement and operations manual will outline your obligations as a franchisee. Familiarize yourself with these to ensure you can fulfill all obligations and make the most of the franchise growth.
Communication: Communication is key to a successful franchise relationship. Make sure you understand the franchisor’s expectations and keep them informed of your progress and any issues you encounter. This will help build a strong relationship and increase your chances of success.
Franchising is a forward thinking approach that can lead to business growth and success while scaling at a rapid pace. Franchise legal agreements are a key aspect of the start of the franchise growth journey. With this guide, you have a step by step franchise consulting action plan.
