Franchise agreement

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 regulates information disclosures under the authority of The Franchise Rule. 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.


 * 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