There are more than 785,000 franchised companies in the United States that contribute nearly $500 billion to the economy. In the food industry, franchised brands such as McDonald`s, Taco Bell, Dairy Queen, Denny`s, Jimmy John`s Gourmet Sandwiches and Dunkin` Donuts. Other popular franchises are Hampton by Hilton and Day`s Inn, as well as 7-Eleven and Anytime Fitness. According to Goldman, three elements must be included in a franchise agreement: Regulation Once a franchise is granted, its exercise is generally subject to regulation by the state or a duly authorized agency. In the exercise of police power – which is the authority of the state to legislate to protect the health, safety, well-being and morals of its citizens – local authorities or political subdivisions of the state may regulate the granting or exercise of franchises. In practice, most franchise agreements are 5 to 10 years old (possibly with the possibility of renewal) and are covered by these provisions. Goldman warned that fees are rarely, if ever, discussed, especially with established franchises. To avoid this, the franchise agreement must indicate the territory requirements for this site. These requirements for the location of the business can determine the success or failure of the business.
Every business needs some kind of insurance for small businesses. The franchise agreement should contain a section explaining the amount of operating insurance that the franchisee must provide for its franchise. In addition, the franchisor should be referred to as “additional insured” in the franchisee`s policy. Prior to 1979, few government legislators had passed laws to protect potential franchisees from the deception of dishonest franchisors. These laws, known as franchise disclosure laws, require that anyone who offers franchises for sale in the state must disclose essential facts – such as the actual costs of operating a franchise, recurring expenses, and motivated reports on earned profits – that would be essential in deciding to purchase a franchise. If you are considering franchising your business in order to expand the reach and profit potential of your brand, then you will need a franchise agreement to enter into this business model with your franchisees legally. This document is prepared by you (the franchisor) and shared with potential franchisees to ensure that the legal requirements of both parties are clearly defined. Key to the handle: Most (but not all) franchise agreements last 10 years.
Make sure you know the penalties for breaking an agreement. The franchise agreement must address certain fundamental elements, including, but not limited to: the dispute settlement section of the franchise agreement should include what happens in the event of a disagreement between the franchisee and the franchisor. In general, this includes non-binding mediation followed by binding conciliation, but can be implemented in any way the franchisor agrees. Franchise Invasion A person or company with a valid franchise may obtain an injunction to prevent the illegal invasion of franchise rights, and may sue for financial damages in the event of financial damage caused by the breach. Like any other agreement, franchise agreements must be thoroughly checked before signing on the points line. Remember if you are considering entering into a franchise agreement: the thought given by a person or company to obtain a government franchise can be an agreement, to pay money, bear a certain burden or fulfill a public duty.