What You Need To Know About Franchise Contract

Establishing a name for your company is a difficult task to do

, which is why most businessmen just choose to franchise when they want to establish a business of their own. When you buy a franchise of a certain product or name, you actually own it, but you will have to follow the original concept and ideas that have been established already. Many companies are available for franchise, most are food chains.

When you buy a franchise of a product, you buy the rights to the franchisor. The terms and conditions are usually preset already and you just have to agree to it. When an agreement is already reached, a franchise contract is made and signed by both parties. The franchise contract is made for the protection of the rights of both parties. Any breach of contract will and can be a ground for a case. The franchise contract is a legal document therefore it must be honored by both parties.

The franchise contract has two basic parts; the purchase agreement and the franchise agreement. In some contracts, the two parts are clearly separated but in some, it is combined into one. Each part of the contract discusses different issues so you must clearly check the contract before signing it. It would also be better if a lawyer is present by your side to check the contract before you sign it.

The purchase agreement of the contract discusses issues that pertain to the price of the franchise, the package it includes and the initial services that they would provide. In the contract, the first thing to check would be the price of the whole franchise. Anything that would seem unclear to you must be clarified first before you sign the contract. The package included in the franchise should also be specified and itemized if necessary. Some franchise already includes the equipments. It is better if the list of what you would expect to be included in the franchise would be clearly stated in the contract. The franchise package may be different in different franchised companies, so always check the contract to be sure that everything they promised is present. Service that would be included in the franchise is also important to know. Most franchise includes services like training of the crew, site selection for the building and marketing assistance and service will be provided.

The second part of the contract, the franchise agreement, will include the services the franchisee will continually get from the franchisor and the rights of the franchisor to the trademark, copyrights, recipes, secret formulas and many more. It will also discuss the obligations and the limitations of the franchisor to the franchise like the marketing strategy, advertising, insurance, corporate image and many more. Royalty fees and other fees that the franchisor is obligated to pay should also be clearly stated in the contract to avoid any misunderstandings that results to breach of contract. One last thing that you must not neglect to check would be the conditions after the end of franchise contract. Most people would not mind checking on it, but you should. It is important that you know the conditions so that you can plan ahead before the contract expires.

by: Lam Seina

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