Franchise agreement template

Franchising is a strategic way to grow a brand and its presence. 

Central to this growth is the franchise agreement, a document that not only formalizes the relationship between franchisor and franchisee but also serves as a blueprint for the operational and financial aspects of the franchise. 

What is a franchise?

A franchise is a type of business relationship where a business owner (the franchisor) grants to an individual or company (the franchisee) the rights to operate a business using the franchisor's brand, trademark, and business model. 

In return for these rights, the franchisee usually pays the franchisor an initial start-up fee and ongoing licensing fees or royalties.

Understanding a franchise agreement

A franchise agreement is a legally binding contract that establishes a franchisor's relationship with a franchisee. It outlines the rights granted to the franchisee, including the use of trademarks, business models, and systems, in exchange for financial compensation to the franchisor. 

This agreement is the foundation upon which the expectations and responsibilities of both parties are built.

The objective of a franchise agreement

The agreement's primary purpose is to safeguard the franchisor's intellectual property and ensure the franchisee operates within the established brand parameters.

It delineates the scope of support from the franchisor, the operational standards to be maintained, and the financial commitments required from the franchisee. Ultimately, it's designed to protect the brand's integrity while fostering a profitable and sustainable partnership.

When to use a franchise agreement template

Consider utilizing a franchise agreement template in the following scenarios:

• Launching a franchise system. When you decide to franchise your business, you'll need an agreement for each franchisee, detailing the operation and the relationship.
  
  
• Onboarding a new franchisee. As new franchisees join your network, a Franchise Agreement sets clear expectations and formalizes their role within the system.
  
  
• Renewing a franchise contract. When an existing franchise agreement comes to an end, a new contract will be needed if both parties agree to continue the relationship.
  
  
• Expanding to new locations. For each new location, a tailored Franchise Agreement will be necessary to address location-specific terms.

Who manages franchise agreements?

Typically, the franchisor's legal team is responsible for managing Franchise Agreements. However, franchisees must also understand and negotiate terms, often with the assistance of their legal advisors.

What should a franchise agreement template Include?

A comprehensive franchise agreement template should cover:

1. Parties involved. Identifies the franchisor and franchisee, including legal names, addresses, and contact information.
   
   
2. Grant of franchise. Details the specific rights being granted to the franchisee, including geographical territories and any exclusivity clauses.
   
   
3. Financial provisions. Outlines initial fees, ongoing royalties, advertising contributions, and other financial obligations of the franchisee.
   
   
4. Brand and operational guidelines. Specifies the standards and procedures the franchisee must follow to ensure consistency across the franchise network.
   
   
5. Training and support. Describes the training and ongoing support the franchisor will provide to the franchisee.
   
   
6. Marketing and advertising. Details the obligations of both parties regarding marketing efforts and the use of the brand's trademarks and logos.
   
   
7. Duration, Renewal, and termination. Specifies the term of the agreement, conditions for renewal, and grounds for termination.
   
   
8. Dispute resolution. Outlines the methods for resolving any disagreements between the franchisor and franchisee.
   
   
9. Confidentiality. Ensures both parties maintain the confidentiality of proprietary information.
   
   
10. Insurance and liability. Details the insurance requirements and limits of liability for the franchisee.
    
    
11. Compliance with laws. Affirms that the franchisee will operate the franchise in accordance with all applicable laws and regulations.

Traditional workflow for managing franchise agreements

Draft

The franchisor's legal team drafts the agreement using a template as a starting point, customizing it for the specific franchisee.

Review

The draft undergoes review by various stakeholders, including management and legal advisors, to ensure it aligns with the brand's standards and legal requirements.

Negotiate

The franchisee, often with legal counsel, reviews and negotiates terms, leading to a final agreement acceptable to both parties.

Sign

Once agreed upon, the contract is signed, often with electronic signatures, making it a legally binding document.

Manage

The franchisor oversees the agreement's execution, ensuring the franchisee complies with the terms throughout the contract's duration.

Renewal or termination

At the end of the term, the contract is either renewed or terminated, with obligations fulfilled and any final settlements addressed.

Automating franchise agreements

Contract management software like Juro can significantly streamline the creation and management of franchise agreements. Automation features include:

• Automated templates. Pre-designed templates can be quickly customized for new franchisees, reducing manual work.
  
  
• Real-time negotiation. Stakeholders can collaborate and negotiate directly within the software, enhancing efficiency.
  
  
• Electronic signing. E-signature capabilities facilitate faster and more convenient signing processes.
  
  
• Secure storage. Signed agreements are securely stored and easily accessible for future reference.
  
  
• Visibility and search. Advanced search functions allow for quick retrieval of specific clauses or terms across multiple agreements.

Franchise agreements formalize the relationship between a franchisor and a franchisee. By clearly defining the terms and expectations, it ensures the integrity of the brand and the success of the individual franchise.

Utilizing a template and embracing automation can save time, reduce errors, and maintain consistency across all of your contracts.

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