FRANCHISING & FRANCHISE AGREEMENTS

What Is A Franchise Agreement?

A franchise agreement is a license that establishes the rights and obligations of the franchisor and the franchisee. A franchise agreement protects the franchisor's rights and interests in and to its intellectual property and brand presence throughout its franchise operations.  A franchise agreement is often flexible, especially for the franchisor, so that the franchisor can control most aspects of the franchisor-franchisee relationship necessary to maintain and evolve the brand and consumer offers throughout the life of the agreement. A franchisee is buying into a ready-made, proven-concept business; however, franchisees are obligated to manage their independently-owned businesses within the franchisor's brand standards. For an overview of how to open a franchise, view our Steps To Opening A Franchise Summary .

What Are The Basic Elements of a Franchise Agreement?

Our Dallas franchise attorneys can advise you on a wide range of legal matters involving franchise agreements, including personal guarantees and leases.  The basic elements of a franchise agreement include the following: 

• Franchise Overview: Identification of the franchisor and the franchisee, the duration of the franchise agreement, the obligations of the franchisee to operate the franchised business to the standards set forth by the franchisor, including upgrades to franchisee’s locations, and the right of franchisee’s successor rights to enter into new agreements. Essentially, the rights and obligations that the franchisor and franchisee have to each other under the franchise agreement.

• Initial and Reoccurring Fees: Franchisees pay an initial fee upon signing the franchise agreement and commit to paying a percentage of revenue for remaining a franchisee. Franchisors often require the franchisee to pay into an advertising or brand fund used by the franchisor to market the brand to the public.

• Franchisee Territory: Most franchise agreements restrict the franchisee to operations within a particular geographic region known as the “protected territory." That protected territory can be defined in terms of miles or terms of a region within a city, state, or country. It is not uncommon for a franchisor to reserve the right to operate within the franchisee’s geographic area for alternative distribution models such as online or direct non-store sales.

• Site Development Within The Territory : Franchise agreements often require franchisees to work with an approved broker to locate and secure a franchise site within the approved territory which meets or exceeds franchisor’s standards. With site development, the franchisor will approve i) the location of the franchisee’s site, ii) the manner and design of franchisee’s site consistent with the franchisor’s brand standards, and iii) the grand opening.
  

• Staff Training: Not only do the managing members of the franchisee have to attend the franchisor’s training classes, the franchisee must also train its employees in accordance with the franchisor’s published standards. These standards may include but are not limited to personnel hygiene, grooming, uniforms, and brand usage, and display.

• Ongoing Support: Franchisors want their franchisees to succeed and, to those ends, franchisors will often assist in business launches, continual improvement, and training support. Most franchisors will have direct access to franchisee payment systems and records and monitor sales decreases and advances, including any support chain distributions or quality issues. This monitoring allows the franchisor to quickly advise the franchisee how best to modify its practice to achieve maximum profitability.

• Brand Management: The franchisor will publish specific guides for the franchisee’s use of the franchisor’s intellectual property, including trademarks and patents. The IP of a franchise system is a “concept” that, when executed correctly, is a valuable asset. Although a franchise concept evolves, strict adherence to a franchisor’s standards provides the consuming public with a reasonable guarantee that it will receive the same or substantially similar service regardless of what store it visits. Consistency is extremely crucial in monitoring and maintaining the franchisor’s brand assets.

• Store Advertising: Advertising is significant to both the franchisor and franchisee. Franchisors will often charge franchisees a small fee to participate in regional or national advertising campaigns.
  

• Miscellaneous Requirements: A franchise agreement will also include provisions relating to term, termination, indemnification, arbitration, mediation, resale rights, transfer rights, rights of first refusal, sources of supply, local advertising requirements, insurance, successor rights, governing law, general releases, personal guarantees, etc.

Franchise Agreement Litigation & Distribution Law 



At Wilson Legal Group, our Dallas franchise lawyers utilize a team-based approach with access to multiple attorneys with substantive years of experience in many practice areas. Our trial attorneys have significant experience handling disputes between franchisors and franchisees, and our franchise attorneys help clients achieve their objectives through franchising, licensing, and distribution arrangements domestically and internationally. Our attorneys represent franchisors and franchisees in international trademark protection and international trademark and domain name portfolio management.  Whatever your franchise services needs may be, our Dallas franchise attorneys have the talent, resources, and experience to meet them in an efficient, timely, and cost-effective manner.