How to Correctly Setup & Use a Franchise Agreement Template for Your Business
A franchise is a business that operates under the oversight of a larger brand, but with the direct management of a private owner, known as a Franchisee. These agreements can be quite beneficial for both the brand and the Franchisee, but they require a clear contract to avoid concerns and problems. These tips will help you personalize and use a franchise agreement template to make your working relationship a positive one.Download Template
Below we’ll cover:
- Important Parts of a Franchise Agreement Template
- Clauses for Your Protection
- Resources for More Information
- Mistakes to Avoid
- Signing the Agreement Securely
Important Parts of a Franchise Agreement Template
A franchise agreement template needs to have all the details of the parties and the franchise location. This includes:
- Names and contact information of the Franchisor (the entity that owns the brand) and the Franchisee (the person opening and running the franchise)
- Location of the franchise, including any limits on other franchises within the geographic area
- Terms of the Franchisor and Franchisee relationship
- Any training the Franchisee will receive
- Explanation of the fees and royalty payments the Franchisee pays for the franchise opportunity
- Signatures of the Franchisor, Franchisee, and witness, which you can collect using Nitro Sign
Clauses for Your Protection
Clauses in the template protect both the Franchisor and the Franchisee. Some that you will need in a franchise agreement template include:
- Restrictive Covenants – This clause restricts the Franchisee from having an interest in a competitive business that would compete with the franchise.
- Insurance Clause – Franchisees must have liability and other types of insurance coverage for the franchise, as outlined in this clause. It may be specific to the type of business the franchise is.
- Notice – This clause tells how any notices regarding the agreement need to get posted, including contact information. Typically notices are required in writing.
- Warranty – A Franchisor wants to know that the franchise will reflect well on the brand, and the warranty clause indicates how the Franchisee should work to do so.
- Severability Clause – The severability clause protects you by making the terms of the contract stay in effect even if one section is deemed unenforceable.
- Governing Law – Because franchises are not always opened in the same state where the Franchisor operates, the Governing Law clause shows what state’s provisions oversee the agreement's terms.
- Quality Control – This clause indicates the measures the Franchisee takes to ensure the quality of the business is what the Franchisor expects. It also ensures that all items or services sold by the Franchisee are approved by the Franchisor.
Resources for More Information
To learn more about franchise agreements, visit:
- Franchise Agreement: 20 Important Things to Know
- How to Negotiate the Franchise Agreement
- US Chamber: Franchise Agreement Guide
Mistakes to Avoid
There are several mistakes you can make when setting up a franchise agreement, and these mistakes could harm both the Franchisor and Franchisee. Watch out for these issues:
- Not having the details – When setting up a franchise agreement template, make sure all the details are filled in. This includes the name of the franchise, payment deadline dates, names, and contact information.
- Not having termination options – Franchise agreements need to give both parties a way out if either party is not upholding their end of the bargain. In addition, they typically have a time frame the agreement covers, and the agreement will get re-evaluated at the end of that time frame.
- Not having a legal signature – Franchise agreement templates must be signed by both parties and a witness. You can use Nitro Sign to collect these signatures digitally if you need to, but do not overlook the need to get a qualified signature on these documents.
- Failure to state penalties – If the Franchisee does not pay fees or royalties on time, the Franchisor has the option to charge fees, and these must be clearly stated in the contract.
Signing the Agreement Securely
The last step in making a franchise agreement is collecting signatures from the two parties and a witness. Sometimes this needs to happen virtually due to geographic distance. Nitro Sign makes it simple to collect signatures and send documents, even when an in-person meeting isn’t possible. Sign up for a free trial of Nitro Sign today.