What is a franchise agreement?
Generally, there are two main types of franchises:
Entire business format franchise: The franchisee receives the use of the trademarks, reputation (good will), trade secrets, copyrights, and marketing and service information of the franchisor. Examples include Subway and Wendy’s.
Product distribution franchise: The franchisor distributes a particular product to franchisees, like vending machines.
Many franchise companies are subject to the strict guidelines of the Federal Trade Commission (FTC). The FTC usually requires, among other things:
- Uniform Franchise Offering Circular – A franchise company is required to distribute a uniform franchise offering circular that includes all legal and financial information about the franchise company to any individual interested in purchasing a franchise
- Other Disclosures – The franchise company must also provide the franchise company’s brochure and all potential franchise agreements to the prospective franchisee at either the time of the first meeting, before a fee is paid or before the agreement is signed.
Do you need an attorney to review a franchise agreement?
An attorney can help you review various documents related to a franchise and help you determine whether you wish to become a franchisee, start your own business or buy an existing business. When entering into the franchise relationship, an attorney can help you negotiate a franchise contract that best suits your business goals and priorities.