A franchise agreement is a legal, binding
contract between a franchisor and franchisee. In the
United States franchise agreements are enforced at the State level.
Prior to a franchisee signing a contract, the US
Federal Trade Commission
The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction ov ...
regulates information disclosures under the authority of
The Franchise Rule
The Franchise Rule defines acts or practices that are unfair or deceptive in the franchise industry in the United States. The Franchise Rule is published by the Federal Trade Commission. The Franchise Rule seeks to facilitate informed decisions a ...
. The Franchise Rule requires a franchisee be supplied a
Franchise Disclosure Document (FDD) (originally called Uniform Franchise Offering Circular (UFOC)) prior to signing a franchise agreement, a minimum of fourteen days before signing a franchise agreement.
Once the Federal ten-day waiting period has passed, the Franchise Agreement becomes a State level jurisdiction document. Each state has unique laws regarding franchise agreements.
A franchise agreement contents can vary significantly in content depending upon the franchise system, the state jurisdiction of the franchisor, franchisee, and arbitrator.
It overall provides the investor with a product, a branded name and recognition, and a support system.
A typical franchise agreement contains
* Franchise Disclosure Document (FDD)
* Disclosures required by state laws
* Parties defined in the agreement
* Recitals, such as Ownership of System, and Objectives of Parties
* Definitions, such as
:Agreement, Territory Area, Area Licensee, Authorized deductions, Gross Receipts, License Network, The System Manual, Trademarks, Start Date, Trade name, Termination, Transfer of
license
A license (or licence) is an official permission or permit to do, use, or own something (as well as the document of that permission or permit).
A license is granted by a party (licensor) to another party (licensee) as an element of an agreeme ...
.
* Licensed Rights, such as
:Territory, Rights Reserved, Term and Renewal, Minimum Performance Standard
* Franchisors Services, such as
:Administration, Collections and Billing, Consultation, Marketing, Manual, Training and Vendor Negotiation
* Franchisee Payments, such as
:Initial Franchise Fee, Training Fees, Marketing Fund, Royalties, Renewal fee, and Transfer fee
* Franchisee Obligations, such as
:Use of Trademarks, Financial Information, Insurance, Financial and Legal responsibility
* Relationship of Parties, such as
:Confidentiality,
Indemnification, Non-Compete clauses
* Transfer of License, such as
:Consent of franchisor, Termination of license, Termination by licensee
* Other provisions
* Governing law
* Amendments
* Waivers
* Arbitration
* Severability
See also
*
American Association of Franchisees and Dealers
The American Association of Franchisees and Dealers (AAFD) acts as a consumer protection organization that exposes the unethical practices that exist in the franchising community, and to educate the public regarding fair franchise rules, and qua ...
*
Franchise consulting
'Franchise consulting' traditionally meant the same consultant-to-client relationship as any other industry wherein the consultant charges a 'fee for services'. But, as of the late 1990s the term 'consultant' has been adopted by many franchise sa ...
*
Franchise Disclosure Document
*
Franchise fraud
*
Franchise termination
Franchise termination is termination of a franchise business license by a franchisor or a franchisee.
The United States Federal Trade Commission administrates oversight of preinvestment franchise disclosures via The Franchise Rule.
Franchise ...
*
Franchising
Franchising is based on a marketing concept which can be adopted by an organization as a strategy for business expansion. Where implemented, a franchisor licenses some or all of its know-how, procedures, intellectual property, use of its busine ...
*
List of franchises
*
The Franchise Rule
The Franchise Rule defines acts or practices that are unfair or deceptive in the franchise industry in the United States. The Franchise Rule is published by the Federal Trade Commission. The Franchise Rule seeks to facilitate informed decisions a ...
*
U.S. Securities and Exchange Commission
ReferencesTerms and conditions of franchise agreement
External links
{{Wiktionary, franchise
International Franchise AssociationAmerican Association of Franchisees and DealersFranchise Brokers AssociationFTC Franchise FAQ Page
Contract law