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What Should the Franchise Agreement Include?

The following information is inherent to an agreement:

It states that you're a part of the franchise and have a certain fixed fee to pay as part of the consideration. It has location provisions. The company will have the right to approve sites. If the company desires, it will have the right to go on a direct lease. In some instances, your franchise agreement might even be tied to a lease directly. The company will determine what the plans and specifications of the general location should be, and will provide that your equipment conform to company specifications.

By the same token, the company has the responsibility to assist you in site and equipment selection and in the general layout of your business, so you can have every opportunity to succeed. That's part of the franchisor's obligation and is stated in most franchise agreements. The agreement will have a section covering the use of the proprietary market and the use of the franchise name. Franchisors will provide that you may not contest their right to the use of that name and will also provide that you must notify the franchisor if somebody else is using the franchisor's name in your area. The agreement will require that you conform to the operating manual and use the products, systems and supplies specified by the company.

Here we get into an area of trust. For example, a franchisor can't require you to buy a product that's available at a better price somewhere else. That's in violation of antitrust laws. These laws have become a great concern to franchisors, since some have gone out of business because they violated those laws and were sued by franchisees.

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