::this post ID is 3951::::in categories of ..Franchise ABCs..::

Tips for signing a franchise agreement

Term

● How long will the franchise relationship last?

● Does the franchisee have the option to extend or renew the term of the franchise agreement?

● Does the franchisee have to meet certain conditions or make additional payments to exercise that option?

Termination

● Can the franchisee terminate the agreement before the end of the term?

● What are the conditions allowing for such a termination?

● Does the franchisee have to pay an early termination fee to the franchisor if he/she chooses to terminate the franchise agreement?

● What constitutes a breach of the franchise agreement allowing the franchisor to terminate?

● Does the franchise agreement provide for a ‘cure period,’ i.e. allowing the franchisee the opportunity to remedy its breach?

● Does the franchise agreement contain any provisions regarding arbitration, mediation and dispute resolution?

Transfer or assignment

● Can the franchisee transfer, sell or assign the franchise agreement to another party?

● Is the franchisee required to give advance notice to—or obtain prior written consent from—the franchisor?

● Can the franchisee transfer or assign the franchise agreement to certain approved transferees/assignees, such as corporate affiliates or family members?

Costs and expenses

● What is the initial investment cost or franchise fee?

● Is it payable in instalments or as a lump sum?

● Does the franchisor require a deposit from the franchisee and, if so, is it refundable?

● Does the franchisee require financing?

● Is financing available from the franchisor and, if so, on what terms?

● How are royalty payments to the franchisor calculated?

● How frequently are the royalty payments due?

● Is the franchisee required to maintain any specific insurance coverage?

● What are the ongoing operating costs for the franchise?

Advertising and marketing

● Is the franchisee required to contribute to a regional or national adverting fund (see page XX)?

● How are contributions calculated and how often are payments due?

● Is the franchisee free to use the franchisor’s trademarks, logos and other IP, subject to any specific restrictions on advertising and marketing?

● Are the trademarks registered?

Location

● Does the franchisee or franchisor select, help select and/or approve the franchise location?

● Are there any restrictions on locations?

● Does the franchisee have territorial exclusivity?

● Can the franchise be relocated by the franchisor or the franchisee?

● Is the location to be leased and, if so, is the franchisee or the franchisor the tenant under the lease?

● Is the franchisor subletting the premises to the franchisee?

● Does the franchisor have to approve the form of the lease and must it include particular terms?

● Is the franchisor providing the premises to the franchisee in ‘turnkey’ condition or is some construction required prior to occupancy?

● Are there specifications—such as floor plans or finishes—that the franchisee must follow?

● Who is responsible for the costs of construction?

● Who is responsible for arranging authorizations and permits for development and construction?

Support and training

● Does the franchisor provide initial and ongoing training, education and support to the franchisee?

● What are the costs to the franchisee?

● Where does the training take place?

● Does the franchisor provide an operating manual?

Reporting and monitoring

● Is the franchisee obligated to provide periodic reports to the franchisor and, if so, how frequently?

● What information needs to be provided?

● Does the franchisor have the right to conduct inspections of the franchisee’s premises or records and, if so, how frequently and at whose expense?

Products and supplies

● Does the franchisor control the pricing of all products and services?

● Is the franchisee obligated to purchase all or some of its inventory directly from the franchisor or specified suppliers?

● Does the franchisee have to make minimum orders?

● Are there any restrictions on distribution or sales by the franchisee?

● Does the franchisor have to approve any new suppliers or products?

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