What is this franchise agreement template?
The basics: A franchise agreement is a legally binding contract between two parties: the franchisor and the franchisee. In this type of arrangement, the franchisor is the business that owns the brand, trademarks, and business system, whilst the franchisee is the individual or business granted the right to operate a business using the franchisor's brand, trademarks and established business model.
The franchise agreement template outlines the terms and conditions of the franchise relationship and governs the rights and obligations of both parties. It is a legal contract that covers various aspects of the franchise arrangement, including each party’s obligations, brand use and the fee structure payable in return for operating the franchise.
When does my business need to use a franchise agreement template?
Franchise your business: If you have a successful business model and want to expand by allowing others to operate under your brand, you might consider franchising. In this case, you would need a franchise agreement template to outline the terms and conditions of the franchise relationship.
Expand an existing franchise: If you want to maintain consistency across your franchise network, having a standardised franchise agreement template ensures that all franchisees operate under similar terms and conditions, leading to uniformity and brand consistency.
Join a franchise: If you are interested in becoming a franchisee and operating a business under an established brand, you would typically be provided with a franchise agreement by the franchisor. If the franchisor does not have their own form of franchise agreement that is being used, you can use this franchise agreement template.
What does this franchise agreement template include?
Key provisions: Docue’s dynamic franchise agreement template includes the option to include the following clauses, amongst others:
- Grant of franchise - This section contains the licence granting the franchisee the rights to operate the franchisee's business and use the franchisor's intellectual property rights when doing so. It also makes it clear that the franchise arrangement is non-exclusive.
- Franchisor’s obligations - This section sets out the franchisor's obligations under this agreement, including actions that it must take prior to the commencement date as well as ongoing obligations.
- Franchisee’s obligations - This section sets out the franchisee's key obligations when running the franchise business. This includes an obligation to comply with the franchise manual - the franchise manual, also known as an operations manual or franchisee manual, is a comprehensive document that outlines the operational and procedural guidelines for running a franchise business. It serves as a guide for franchisees to ensure consistency and uniformity across all franchise operations, by maintaining brand standards and procedures.
- Records and reporting - This section sets out the franchisee's obligations to maintain sufficient records and report to the franchisor. It also sets out the franchisor's rights to audit the franchisee's records in connection with this agreement.
- Fees and payment - This section sets out the payment terms that apply to payment of fees under this agreement, together with the remedies available for late payment. Usually, franchise arrangements include an initial, upfront payment as well as ongoing royalty payments that are linked to the level of revenue generated by the franchisee’s business. Sometimes, advertising fund contributions and support fees are also charged by the franchisor.
- Marketing - This section sets out each party's obligations in relation to marketing initiatives for the franchise as a whole, as well as the franchisee's business.
- Insurance - This section sets out the franchisee's obligation to hold insurance in respect of the franchisee's business, and the franchisor's rights in relation to that insurance.
- Intellectual property - This section contains a licence for the franchisee to use the franchisor's trade marks in its business. It also includes the option to include a number of restrictions in relation to use of the trade marks, as well as optional warranties from the franchisor in relation to its intellectual property rights.
- Limitation of liability - A limitation of liability clause limits the amount a party has to pay to the other party if they suffer loss in connection with this agreement. It also sets out the types of losses that can be recovered if a claim is made. In the absence of a limitation clause, there is no financial limit on the damages a party can ask for, and it is therefore common to include a limitation of liability clause in commercial agreements.
- Termination and its consequences - This section sets out the parties' rights to bring this agreement to an end early. It also states the consequences for both parties following termination.
- Non-solicitation - This clause sets out restrictions to prevent a party from soliciting the other party's employees for the duration of this agreement and for a certain period of time after the agreement ends. In respect of this clause, ‘solicit’ means the soliciting or poaching of an employee of the other party with a view to engaging that person as an employee.
Assumptions: This is a short-form franchise agreement that is intended for use in basic franchising arrangements. It should only be used where a franchisee is being granted rights on a non-exclusive basis. It also assumes that a separate, detailed franchise manual will be provided to the franchisee that sets out the operational rules and procedures that apply to running the franchise business.
Why Docue?
Simple to use: With Docue, you can create a top-quality franchise agreement in just minutes. The franchise agreement template includes model clauses designed by our business lawyers to help you draft the contract yourself and tailor it to your needs. Guidance notes that have been drafted by our lawyers are included throughout to help you through the contract creation process.
Full contract process: Signatures can be collected electronically, and all contracts you make are securely saved in your company's own contract account.
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