Franchise Documents Review

Reviewing your Franchise Agreement

A Franchise Agreement is an agreement signed between the franchisor and the franchisee containing detailed information about the franchise opportunity that one may be investing in. The franchise agreement contains the complete terms and conditions of the operation of the franchise, the operating procedures as well as restrictive covenants that become operative on the termination of the agreement.

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Our Franchise Documents Review experts draft and prepare the required supporting documents


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Why reviewing the agreement is important?

A franchise agreement is usually a standard form of contract with the 'take-it-or-leave-it' conditions. The covenants in the franchise agreement play a crucial role in determining the interests of both parties. Review of these covenants and other terms and conditions in a franchise agreement helps a potential franchisee or dealer to gain vital knowledge of the legal obligations drafted in the said agreement.

If a franchisee is not able to understand and comprehend the franchise agreement, then that may be used by the franchisor to their advantage. This can result in the form of undue termination of contract or enforcement of post-term restrictive covenants that will prevent the franchisee from continuing to engage in further similar business after termination.

How to apply?

Elements of the Franchise Agreement:

The following elements are to be taken into consideration while reviewing the franchise agreement:

  1. Duration of the agreement: The duration of the Franchise Agreement determines the period for which the franchise relationship will remain operative. Usually, the franchise agreement continues for a period of 5 to 10 years and gets renewed if the relationship between the parties remains harmonious.
  2. Business operation: This part of the franchise agreement includes information regarding the level of support that will be provided by the franchisor. It contains information regarding the procurement of goods and services, maintaining the standard of operation, account management, etc.
  3. Site selection: The franchisee agreement contains complete information regarding the site where the franchisee will conduct his/her business.
  4. Training and Support: The franchisee agreement contains covenants regarding the training and support to be provided by the franchisor to the franchisee. These pieces of training are provided before the opening of the franchisee business. The agreement also mandates stipulations on conditions  &  future changes in case of any changes in operation
  5. Use of intellectual property: The intellectual properties such as Trade Marks, patents, and copyright are valuable properties of the franchisor company. The agreement involves covenants regarding the rights of the franchisee to use the intellectual property of the Franchisor.
  6. Franchise Territory: The franchise agreement contains the territories in which the franchisee operates his/her business. The purpose behind the demarcation of territories is to avoid too much competition in a single area.
  7. Advertising marketing: The Franchisor pays the expenses towards the advertisement of the brand. The franchise agreement contains covenants as to the fees to be paid by the franchisee towards the advertisement expenses.

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