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.[1] 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.[2]

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

Agreement, Territory Area, Area Licensee, Authorized deductions, Gross Receipts, License Network, The System Manual, Trademarks, Start Date, Trade name, Termination, Transfer of license.
Territory, Rights Reserved, Term and Renewal, Minimum Performance Standard
Administration, Collections and Billing, Consultation, Marketing, Manual, Training and Vendor Negotiation
Initial Franchise Fee, Training Fees, Marketing Fund, Royalties, Renewal fee, and Transfer fee
Use of Trademarks, Financial Information, Insurance, Financial and Legal responsibility
Confidentiality, Indemnification, Non-Compete clauses
Consent of franchisor, Termination of license, Termination by licensee

See also


Terms and conditions of franchise agreement

  1. ^ "Consumer Information" (PDF). ftc.gov. Retrieved 25 January 2015.
  2. ^ "Buying a Franchise: A Consumer Guide". ftc.gov. Retrieved 25 January 2015.