Question: What is a franchise agreement?Answer:
A franchise agreement is a specific contractual document which formalises the legal relationship between a franchisor and franchisee. As with any other contract, it sets out the rights and obligations of each party. A franchise agreement will usually contain the franchisee’s obligations relating to performance criteria, payment of fees (royalties, marketing fees, training fees, transfer fees, termination fees, utility levies etc.), marketing, reporting, training, supply of products and services, territory etc.
Similarly, the agreement will often contain the franchisors obligations relating to approved equipment/products/suppliers, advertising/marketing, assistance and support, client enquiries etc. A franchise agreement is required to be accompanied by the franchisor’s disclosure document. This disclosure document provides further detail of the business and other franchisee obligations.
Every franchising agreement follows the Franchising Code of Conduct. The code dictates the rights and responsibilities of the franchisor and franchisee but does not set out the Terms and Conditions of the agreement itself.