A franchise agreement is made between an existing company and another party allowing this party to operate a branch of the existing company as their own. In return they will pay a fee to the original business as well as a share of the profits. They will also be required to adhere to all of the company rules and regulations.
Usually a franchisee agrees to take on the franchise for a set number of years and cannot just walk away from it. There may be an option to sell the franchise on to a third party. If the franchisee is in breach of any terms of the contract then the franchisor may have the right to terminate the agreement.
A franchise agreement can be for any length from a year onwards. However most commonly they have a term of around 3-5 years with two options to renew. So a franchisee could reasonably expect to take on a business for 9-15 years initially.
Most franchise agreements are non-negotiable. This is a good thing, meaning that all franchisees are bound by the same terms and that the established company’s standards and branding are maintained. Some points that may be negotiable are the initial payment, the size of any territory included, the amount of start-up training given. More flexibility than this is a danger signal.
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