Definition

A franchise agreement is a binding legal document that grants the franchisee the right to operate a business associated with the franchiser’s trademark. Franchise agreements intend to protect the intellectual property of the franchisor.

Essential Characteristics

A franchise agreement should consider the following:

• The responsibility of the franchisee to comply with the business’ operation systems
• The franchisee’s duty to meet the franchisor’s training and performance standards
• Reporting requirements
• Supply arrangements and requirement
• Responsibilities to staff
• Responsibilities to personnel in the franchisee’s local area
• Promotion and marketing practises to be undertaken by the franchisee
• Performance criteria to be applied to the franchisee
• Training and support
• Marketing assistance
• Renewal clauses
• Termination clauses
• Dispute resolution process.