Interested in starting a franchise business?
If you’re exploring franchise ownership, then you need to understand the importance of the franchise agreement. Here’s why.
The franchise agreement is the contract. It sets forth the terms for ownership, including your rights and obligations.
As a franchisee, you acquire a bundle of rights. These rights are expressed in the franchise agreement and conveyed upon the execution of the agreement. A common example is the right to display the marks and trade dress on exterior signage. Other examples of rights you acquire include systems, processes, and recipes. The point is you buy the rights to use the franchise business. That’s what you buy, the rights.
However, your purchase also includes obligations, including negative and restrictive covenants, which are requirements to refrain from certain conduct or actions. Covenants not to compete are very common in franchise agreements, along with prohibitions from publicly disparaging the franchisor.
Know… then act! The very first step in buying a franchise business is to educate yourself on the terms of the franchise agreement. Thereafter you can make informed decisions, including whether to proceed. As a franchise attorney my initial role is to provide this understanding to our clients, before contemplating any negotiations on the agreement itself.
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