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