As part of the franchisor that uses the franchisor`s brand, the franchisee pays upfront and current franchise fees to the franchisor. Spelling these fees in advance is important for both parties, as it will help the franchisee determine whether they can afford to enter the franchise – or whether they need to seek franchise financing to cover costs – and whether the franchisor has created a sustainable business model. In addition, this section of the franchise agreement defines the type of location that franchisees can choose for the franchise. You can set the conditions of the type of market that surrounds the physical location, the amount of foot or car traffic it sees and other provisions. This section could also specify a timetable for the duration of the establishment of a site for brick and mortar by the franchisee. “You want the franchise to be the same and feel the same, whether you`re in a place in New York, Iowa or Europe,” Goldman said. Although a franchise agreement is unique for each franchise, it must still contain all the necessary elements. While there is no model for franchise agreements that allow you to log in to your company name and with which you execute, the above elements will help you reach a comprehensive agreement that will help you start your franchise business. Working with a franchise consultant or franchise lawyer can also ensure that your franchise agreement is legal and will protect your brand so that you can do so. Every business needs some kind of insurance for small businesses. The franchise agreement should contain a section explaining the amount of operating insurance that the franchisee must provide for its franchise.
In addition, the franchisor should be referred to as “additional insured” in the franchisee`s policy. “A franchisor can call itself a membership or a license, but if those three conditions are met, you enter into a franchise agreement,” Goldman said, noting that some franchise agreements may attempt to disguise themselves as licensing agreements. “A licensing agreement gives you permission to use the name and logo, and that`s it – you don`t get the marketing help or the type of transactions you`d get from a franchise.” While there is no franchise contract model or laws that must be included in a franchise agreement – each franchise is ultimately different – there are strict rules that make a franchise a franchise.