Since a franchise agreement must reflect the uniqueness of each franchise offer and explain the dynamics of the proposed franchise relationship, copying the agreement from another franchise system is probably the biggest mistake a new franchisor can make. A franchisor must reveal the context of the company – including the experience of its senior executives – for the past five years, and if, in the last seven years, one of its executives has been convicted of a crime, was convicted of fraud, was tried for fraud in a civil action, was held responsible for a fraud case , has been subject to a currently effective court injunction or an administrative agency judgment on the franchise, or has been subject to insolvency or insolvency proceedings in the past seven years. As a franchisor, you lend your brand to your franchisee. This is a great risk if you do not protect yourself properly and your brand. That`s why it`s important to set rules on the shape and sound of your brand, when you should use protected intellectual property, what advertising can be done and what the franchisee needs to know about using your brand. Franchise agreements represent all transfer rights to a buyer of the franchisee`s ownership shares in the franchise relationship. Sometimes franchisors retain the right to a first refusal, which means they get the first chance to buy your business if you decide to sell. The franchise agreement is long, detailed and is made available to potential franchisees as exposure to the FDD well in advance of signing, to ensure that they have time to review the agreement and get advice from their lawyers and other advisors. Each franchise agreement is unique to the franchise.
While these sections may be a policy for creating your franchise agreement, there is a lot of legal language that needs to be included in a franchise agreement, and you will probably need the help of a franchise lawyer to conclude it. A franchise lawyer can ensure that your franchise agreement is a legally binding document. The agreement should provide for the franchisor`s obligation to assist franchisees in marketing and advertising. Unfortunately, some agreements are more demanding for franchisees than for franchisors.