Basic Franchise Agreement Terms

The FTC rule requires franchisees to make available to potential franchisees a Presal Disc Disclosure (FDD) document intended to provide potential franchisees with the information necessary to purchase a franchise. Risks and opportunities, as well as comparing the franchise with other investments, are part of the reflection. License fees: The amount of money, usually a percentage of the gross turnover that the franchisee pays regularly (usually monthly) to the franchisor as part of the franchise agreement. Typical royalties are less than 10% of gross revenue, but some businesses may have higher fees or another type of pricing structure, depending on the services/support offered by the franchisee. A franchise agreement is a license that defines the rights and obligations of the franchisee and the franchisee. The purpose of this Agreement is to protect the franchisee`s intellectual property (IP) and to ensure consistency in the way each of its licensees works under its brand. Although the relationship is codified in a written agreement that must last up to 20 years, the franchisee must be able to develop the brand and its consumer offering to remain competitive. In general, this term lasts between five and twenty years. Once the term is over, the franchisor can extend the agreement if things go well and/or if the contract can be readapted.

Acknowledgement of receipt: point 23 of the franchise disclosure document (FDD), signed by the potential franchisee and made available to the franchisee (on paper or electronically) as proof of the date on which the FDD was received by the interested party. . . .