As a franchisee, you must keep accurate records and submit regular financial and operational reports. Since royalties often represent a percentage of gross sales, it is particularly important to report accurate sales figures. The franchisor generally has the right to request additional information, including tax returns, and verify your records. You may also charge an audit fee. While the definition of the franchise agreement is fairly simple, documentation can be complex. Sometimes a franchise agreement contains an exclusivity clause that guarantees that no other franchisee can open a franchise on your site. An experienced franchise lawyer can explain the important provisions of the franchise agreement. A franchise lawyer may also be able to highlight unusually harsh or one-sided provisions that are not common in the industry. An experienced lawyer will understand what they need to pay attention to in the franchise disclosure document and will be able to identify the red flags. In addition, common law counsel and state laws that protect franchisees may know. If you know important points before you sign, you can`t make a major mistake. Read and verify this document and have it verified by legal advisors with franchise experience.
You want to be informed before signing a franchise agreement. Like a marriage, you want this relationship to be long. The franchisee pays an upfront fee, often simply referred to as franchise fees. In addition to these one-time fees, the franchisee pays current licensing and advertising fees as well as royalties, annual royalties and more. The amount of the deductible fee is set on a case-by-case basis. “You can only use things that are expressly given to you the rights to use,” Goldman said. “If your franchise agreement says you can only do three things listed in the agreement, it means you can`t do a fourth thing that`s not mentioned.” The contract should also cover the necessary costs and who is responsible for them. For example, the franchisee may be responsible for the compensation of training and travel expenses for staff to participate in the training. While a franchisee usually finds and develops its own site, the franchisor may impose permission and refusal fees on the site`s location. The franchisor should also include in the franchise agreement that it can approve the website to ensure that it meets the brand`s standards prior to opening.
The agreement must also be flexible enough to allow the franchisor to make contractual changes that reflect decisions made in response to the specific needs of franchisees. However, there is no change to the provision that franchisees must manage their independent businesses on a daily basis in accordance with brand standards. Fees, including upfront franchise fees covering the cost of using the franchisor`s logo and operating system, as well as the fees you pay to the franchisor, must be included in the franchise agreement. Similarly, the agreement will often include Franchisors` obligations with respect to approved devices/products/suppliers, advertising/marketing, support and support, customer requests, etc. A franchise agreement must be covered by the franchisor`s disclosure document.