About the franchise agreement in simple words

Imagine that you want to open your own pizzeria. You can develop the menu, interior design, and marketing strategy yourself, but it will take a lot of time, effort, and risk. Or you can buy a franchise of a well-known chain of pizzerias. In this case, you get a ready-made business model that has already proven its success: a recognizable brand, clearly defined work standards, marketing materials, training and support from the franchisor.

In simple words, a franchise agreement is an agreement under which one company (the franchisor) grants another company (the franchisee) the right to conduct business under its brand and under its own rules.

What are the franchises?

There are many types of franchises, but the most common are:

• Merchandise franchise: the franchisee sells goods under the franchisor's brand. Example: "ABV" stores.
• Service Franchise: The franchisee provides services under the franchisor's brand. Example: "Toni&Guy" hair salons.
• Manufacturing franchise: the franchisee produces products using the franchisor's technologies. Example: Coca-Cola plants.
• Combined franchise: combines elements of the above types. Example: McDonald's restaurants.

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What are the benefits and obligations of a franchise for the franchisee?

Pros:

1. Ready-made business model: no need to spend time and money on developing your own.
2. Recognizable brand: easier to attract customers.
3. Marketing support: the franchisor helps with the promotion of the business.
4. Training and support: the franchisor provides knowledge and assistance in the work.
5. Discounts on goods and services: The franchisee may receive discounts from the franchisor's suppliers.

Obligation:

1. Lump sum payment: This is the initial payment for the right to use the franchise.
2. Royalties: These are regular deductions from the franchisee's income paid to the franchisor.
3. Adherence to standards: the franchisee is required to adhere to well-defined performance standards related to product quality,
4. customer service, marketing, etc.

What are the key points of the franchise agreement?

A franchise agreement is a complex legal document that must clearly define the rights and obligations of both parties. Here are some of the key points to look out for:

• Subject of the contract: what exactly the franchisor provides to the franchisee (brand, know-how, marketing support, etc.).
• Entry fee and royalties: size and payment procedure.
• Term of contract: how long the franchise will be valid.
• Territory: Where the franchisee can conduct business under the franchisor's brand.
• Requirements for franchisees: experience, financial capabilities, compliance with certain standards, etc.
• Responsibilities of the franchisor: providing training and support, monitoring compliance with standards, etc.
• Responsibilities of the franchisee: compliance with rules and standards, record keeping, payment of payments, etc.
• Liability of parties: for damage caused by one party to another.
• Dispute resolution procedure: how conflicts between the franchisor and the franchisee will be resolved.
• Termination of the contract: conditions and grounds for terminating the contract.

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Contact the law firm "Prykhodko and Partners" if you need help with the franchise agreement

A franchise agreement is a legal document that clearly regulates the rights and obligations of both parties. Before signing it, it is recommended to carefully study all the conditions and, if necessary, consult a lawyer.

The legal company "Prykhodko and Partners" is ready to help you in all matters related to franchising:

1. Analysis of the franchise agreement.
2. Consultations on the rights and obligations of the franchisor and the franchisee.
3. Legal support for concluding a franchise agreement.
4. Protection of your interests in case of disputes.

Contact us and we will help you start a successful franchise business.

If you want to order a consultation or find out the cost of services related to a franchise agreement, fill out the form below.