Why You should Develop a Franchise Agreement Sample For Your Business
Franchise agreement is more like a contract(a legal one) between two important figures or individuals, these two individuals can be called franchisor and franchisee. There is a mutual agreement between the franchisor and franchisee which basically has to do with business, the franchisor being the one that has enough resources for a particular business offers to help the franchisee by involving him in the business.
The franchisor offers help and support the franchisee on necessary needs, and in return, the franchisee helps the franchisor to sell and promote his business and to also generate income for him.
This agreement will clearly state the duties and what is expected of each party, the limitations of each party, that is, what each person is not permitted to do and also how income will be shared. Oftentimes, the franchisee get paid based on agreement made by each parties, which can be weekly, monthly, annually and sometimes get a share of the income he is generating and this depends entirely on what is in the franchise agreement.
One major limitation stated in the franchise deed is that the franchisee can only do the business in a particular area and is not allowed to involved him or herself in other franchised opportunities or jobs.
The franchisee is restricted so that the franchisor can monitor him very well and make him very much accountable, for instance, once the franchisee knows that he is within the reach of the business owner(franchisor), he will be very responsible in order to have a good record.The franchisee is not allowed to be involved in other franchised jobs so that he can be very loyal to the franchisor and the business.
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In the United States, the process of making a franchise agreement is done at the state level mainly because all states have different rules guiding the franchise agreement process. The franchisor is provided with manuals, a copy of the agreement, license to do the particular business and products and sometimes, training.
Franchise agreement is very important in franchising a business, some of the reasons why it is important are as follows:
1. To prevent conflict: As human beings, we have different opinions about several concepts and things, therefore it is unavoidable for the franchisor and the franchisee to have conflicting opinions. The agreement helps to limit the extent the conflict can get to.
For instance, if there is a no argument between the two parties about the sharing of the income, then they refer back to the agreement and then share the income based on laid down rules of the agreement. It also helps to resolve conflicts, once the income has been shared then the conflict is resolved because the income is shared in accordance with what is stated in the agreement and not what anyone says.
2. To promote good business strategies: It is not everyone who has good business ideas that have enough resources to execute the idea and that is why we have what is called “franchise agreement”. It enables those who have enough resources to help those who have good business ideas without inadequate funding. Once the two parties have an agreement then the plans can be executed.
3. To Enhance Easy Franchise Operations: Once there is a mutual agreement between two parties, then there will be a smooth operation. The franchisor and franchisee each knows their rights, obligations, freedom and limitations all thanks to franchise agreement then there will be no failure on anyone’s part.
4. Full understanding of the Franchise: The franchise agreement clearly states what they both need to know, therefore they both have full knowledge of franchise. If one of them does not know what franchise entails, then the person is not fully ready to engage in it. It is advisable for the two parties to study the franchise agreement and have adequate knowledge of franchise.
5. For Renewal Purposes: The franchise agreement clearly states when the agreement will expire, if it can be renewed and how to renew it. This helps both parties not to be ignorant of when their services to each other ends and there is free rein for them to decide if they still want to proceed with the franchise or not.
The franchise agreement also states what each person should benefit from the franchise. On the aspect of the franchisor, his major benefit is that his business grows larger, becomes more successful, covers larger geographical areas and also generates larger income. There is no franchised business that remains stagnant, it will grow once it have hardworking and reliable franchised workers (franchisees).