{"id":2478,"date":"2022-07-01T17:22:58","date_gmt":"2022-07-01T17:22:58","guid":{"rendered":"https:\/\/www.franchiseopportunities.com\/blog\/?p=2478"},"modified":"2022-07-05T16:37:46","modified_gmt":"2022-07-05T16:37:46","slug":"what-legal-document-sets-up-franchise","status":"publish","type":"post","link":"https:\/\/www.franchiseopportunities.com\/blog\/general-franchise-information\/what-legal-document-sets-up-franchise","title":{"rendered":"What Is the Legal Document that Sets Up a Franchise?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Contracts define business relationships and spell out the benefits and responsibilities of each party in the agreement. In a franchise relationship, this contract is known as a franchise agreement, and it is one of the most basic <\/span><a href=\"https:\/\/www.franchiseopportunities.com\/info\/legal-requirements-start-franchise\"><span style=\"font-weight: 400;\">legal requirements to start a franchise<\/span><\/a><span style=\"font-weight: 400;\">. This guide will help you learn more about the franchise agreement and <\/span><a href=\"https:\/\/www.franchiseopportunities.com\/info\/how-start-franchise\"><span style=\"font-weight: 400;\">how to start a franchise<\/span><\/a><span style=\"font-weight: 400;\"> of your own.<\/span><\/p>\n<p><b>What Is a Franchise Agreement?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">A franchise agreement is a legal contract that defines the relationship between the franchisee (the one running the franchise location) and the franchisor (the franchising company). A franchise agreement will explain two topics:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">What are the responsibilities of the franchisee?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">What support or benefits does the franchisor provide?<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Franchise agreements vary by company and industry but the document will explain the terms of the agreement and any fees involved. The franchise agreement will also explain the legal requirements to start a franchise and include information regarding subjects like company trademarks, termination, and renewal.<\/span><\/p>\n<p><b>What Does a Franchise Agreement Include?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">A franchise agreement will include a lot of information. If you\u2019re not sure how to start a franchise after reading the document, you might ask a lawyer to explain any parts that seem unclear. Generally, however, the franchise agreement will explain such requirements as:<\/span><\/p>\n<p><b>Costs and Fees<\/b><\/p>\n<p><span style=\"font-weight: 400;\">As a franchisee, you\u2019ll be expected to invest in the company. These fees commonly include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">An upfront franchising fee<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Monthly royalty payments<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Costs of marketing\/promotional materials<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Costs for equipment, supplies, etc.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">These fees allow you to operate under the franchise name and sell their products or services.<\/span><\/p>\n<p><b>Duration and Renewal<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The franchise agreement will also explain how long the contract is good for. Since you are investing money into this opportunity, you\u2019ll want to find a franchisor that offers a long-term contract of ten years or more.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The franchise agreement will also include clauses that permit franchisees to renew their contract, which potentially allows franchisees to operate the business in perpetuity so long as other terms and conditions are met.<\/span><\/p>\n<p><b>Benchmarks and Timeline<\/b><\/p>\n<p><span style=\"font-weight: 400;\">In some cases, the franchisor may set a timeline or a set of goals that the franchisee is expected to meet. This is important, as failing to meet these benchmarks can be considered to be a violation of the agreement and might even result in termination or negate any renewal options you might have had.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Prior to signing the agreement, you\u2019ll need to ensure that you have the support you need to meet these goals to satisfy your obligations.<\/span><\/p>\n<p><b>Trademarks and Intellectual Property<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Understandably, the franchisor has a right to protect their intellectual property, which includes their name, logo, slogans, designs, and other branded content. But the franchise agreement grants the franchisee the legal right to use this content as part of their franchised business.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Typically, this agreement also extends to proprietary business systems, such as the operating manual or company software. While this section of the agreement is fairly standard, it ensures that you have full rights to use the company\u2019s trademarked content as part of your franchise.<\/span><\/p>\n<p><b>Support and Training<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Not everyone knows how to start a franchise, which is why it helps to have a company that offers support and training. If you\u2019re new to the industry, pay close attention to this section, as it clarifies what level of training the company can provide for you to get started.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Additionally, the company may provide other forms of support, especially during the startup process. They might help with such needs as:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Securing equipment<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Establishing a hiring process<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Obtaining business funding<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Setting up your point of sale (POS) system<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">This support will make it easier to get started and gives you a greater chance of success.<\/span><\/p>\n<p><b>Operating Territory and Non-Compete Agreements<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Among the legal requirements to start a franchise is the operating territory. This specifies the geographic region in which your franchise location will operate.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Since each franchise owner is essentially in business for themselves, overlapping territories can create friction, even if two franchisees are working for the same company. The franchise agreement is designed to prevent franchisees from infringing on one another\u2019s territories and competing with one another.<\/span><\/p>\n<p><b>How Do I Find a Franchise?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Before you put your name to a franchise agreement, it helps to compare agreements from multiple companies to determine which franchise offers the lowest costs and greatest benefits. Franchise Opportunities can make this process easier, thanks to our franchise locator tool. You can use this tool to find <a href=\"https:\/\/www.franchiseopportunities.com\/great-franchises-c?\">franchising opportunities<\/a> near you and start your entrepreneurial journey today.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Contracts define business relationships and spell out the benefits and responsibilities of each party in the agreement. In a franchise relationship, this contract is known as a franchise agreement, and it is one of the most basic legal requirements to start a franchise. This guide will help you learn more about the franchise agreement and <a href=\"https:\/\/www.franchiseopportunities.com\/blog\/general-franchise-information\/what-legal-document-sets-up-franchise\" class=\"more-link\">&#8230;<span class=\"screen-reader-text\">  What Is the Legal Document that Sets Up a Franchise?<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":2480,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-2478","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general-franchise-information"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Is the Legal Document that Sets Up a Franchise? - FranchiseOpportunities.Com Blog<\/title>\n<meta name=\"description\" content=\"A franchise agreement is a legal contract between the franchise and the local operator. 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