Any franchise agreement should as a minimum cover the following:
a) The rights granted – are you being granted an exclusive or non-exclusive right, what are conditions attaching to the rights granted?
b) Duration – how long is the term of the agreement?
c) Fees – the franchise agreement should set out what fees are payable, when and how. It should also set out whether the fees can be changed and if so, how.
d) Initial Obligations – the agreement should set out the initial obligations of both parties. This usually covers what a franchisee must do in order to start trading (whether there are any registrations which need to be obtained, premises etc) and what the franchisor will provide (usually training and support).
e) Franchisor’s Obligations – there should be a clause which sets out what the franchisor will be required to provide during the term of the franchise agreement.
f) Franchisee’s Obligations – this is usually the most detailed clause because this will set out what the franchisee must and must not do.
g) Renewal – there should be a clause dealing with renewal of the franchise term. This would typically set out the process that needs to be followed and any conditions and fees which would apply.
h) Sale of Business – there should be a clause covering the process and requirements which will apply if the franchisee wanted to sell the business.
i) Death and Incapacity – this clause should cover what would happen in the event of the individual’s death or incapacity.
j) Termination and Post Termination Obligations – this clause would typically cover the circumstances in which the franchisor has the right to terminate the franchise agreement and this clause is very important. The agreement would then usually contain a clause that would summarise the obligations of the parties once the agreement has been terminated.
k) Restrictions – whether a stand alone clause or not but you can certainly expect a clause that would set out a restriction on the franchisee’s ability to be involved in a similar or competing business both during the term of the franchise agreement and after its termination.
In addition to the above, there should also be clauses dealing with marketing, employees, insurance, records and reporting, inspections and audits, data protection, if the business is premises based provisions relating to premises, if the business requires vehicles clauses setting out requirements applicable to vehicles, dispute resolution and indemnities in favour of the franchisor.
