Whether you want to invest in a nail salon, restaurant, or urgent care franchise, you will be required to do one thing all these businesses have in common: sign a franchise agreement.
This document will be presented to you after you attend Discovery Day. It is the final piece of the process to help you decide whether the franchise you are interested in is right for you.
A franchise agreement is a legally binding document that establishes the terms of the franchisor and franchisee relationship. It explains in detail what the franchisor expects of you.
The typical franchise agreement is 25 to 30 pages long. Because the terms, conditions, and method of operations vary greatly depending on the type of franchise business, there is no standard franchise agreement. There are, however, several common elements in these contracts.
Initial and Ongoing Fees–This section will outline the franchisor’s fee structure. Most franchise owners pay an initial franchise fee to the franchisor as well as an ongoing royalty fee, which is usually a percentage of total sales. Every franchise owner is required to contribute to an advertising and marketing fund. Those costs will be outlined in this section.
Location– The agreement will determine the territory in which you will operate your business and summarize your exclusivity rights. Protected territories are important to limit market saturation and improve the success of your franchise location.
Training and Support – You will learn about the franchisor’s obligation to provide training and support services during the entire term of the agreement. Renewal conditions will also be included.
Duration –This section sets forth the length of the franchise contract. The average term is between 10-20 years, according to Franchise Gator.
Trademark/Intellectual Property –Here, the franchisor grants you the right to use the brand’s name and stipulates how you can use the brand’s trademark, patent, and logo. You will also be given the right to use intellectual property such as proprietary software and operating systems.
Termination/Non-Competes– Non-payment of the franchise fee, bankruptcy, and failure to make necessary repairs to the franchise property are common causes for early termination of your contract with the franchisor. This section also includes restrictive covenants to what franchise owners can do should they terminate the agreement early. For example, you or an affiliated company may not be permitted to operate a competing business for a period of years.
Before You Sign a Franchise Agreement
Franchises fall under the Federal Trade Commission oversight. The FTC has a set of regulations that govern most franchises. Franchisors must abide by strict transparency requirements in the form of a Franchise Disclosure Document (FDD) that every prospective franchise owner will receive.
The franchise agreement must be attached to the FDD and delivered a minimum of 14 days before a binding contract is signed. This gives you time to review the agreement with an attorney.
The American Family Care Difference
Ultimately the franchise agreement should provide a clear picture of your investment and the opportunities that investment affords your business. At American Family Care, we pride ourselves on transparency throughout the entire franchising process, from your initial inquiry into our system to the support we provide years into our relationship. Many of our franchise owners entered the process with curiosity about the healthcare industry and committed to our brand because they trust that we execute on the expectations laid out in the agreement.
If you’re interested in learning more about the franchising opportunities with American Family Care, you can apply now by filling out the no-obligation form.