What Is Included In The Legally Binding Franchise Contract? – Understand Before Signing It


Before taking ownership of a franchise, you will need to sign an agreement. The franchise contract is a document that defines the terms under which a franchisee will be permitted to conduct a business. Franchise contracts are lengthy and detailed, so never sign them until you read and understand the contained terms within multiple pages.

If you are planning to partner with Clubbish, a reliable digital marketing agency franchise, then you will need to first understand the contents of the franchise agreement before you sign it.

What is included in the franchise contract?

The legally binding franchise contract defines the –

  • Franchise boundaries & territories

Every franchise will cover a specific area that is defined in the agreement. It is done to ensure that there is not much competition within their area and success in that region.

  • Provided support and training

Franchisors will train new franchisees as well as offer them ongoing support. The new franchise will understand the standard business practices that brought success in the first place for the franchisor. Ongoing support can be in the form of advertising subsidies, discounts on supplies & equipment, and continuous training.

  • Franchise agreement duration

Usually, the agreement is for 10 to 20 years. In this section, conditions about selling the franchise to someone else will be defined. It is stringent to ensure that future franchise buyers are qualified. There can also be a right to first refuse to allow the franchisor to buy the franchise back rather than selling it to some other buyer.

  • Franchise fees and costs involved.

Besides initial purchase fees, there will be costs involved in franchise ownership, including advertising buy-ins, monthly royalties, and other costs. Many franchisor’s contracts include conditions on how much funds the franchisee needs to have on hand to cover everything from equipment repair to payroll and maintenance of an involved property.

  • Use of trademarks, signage, and various patents [dos and don’ts]

Franchisor owns the patents, trademarks, and signage connected with the franchise. The dos and don’ts of how a franchisee can use these entities are described in this section.

  • Operating rules

Every franchisee has to operate under specific rules. It will include operating hours, employee pay scale, specific products or services offered, and more. Used software program, managerial structure, and location layout will be defined under the operating rules clause.

  • Franchise termination policies and renewal rights 

There can be a dispute between the franchisee and the franchisor, which can reach the court. In this section, there can be an Arbitration clause that can prevent both sides from taking legal action unless the arbitrator re-examines their case and provides a recommendation. There are also specifics on renewal and termination included.

Small negotiations to make

For your digital marketing agency franchise, you can make some small negotiations. You can gain favorable terms, which will hardly impact the franchise’s overall operation. Request for Help with grand opening or franchise fee installments or waive personal guarantee or modification on the right of first refusal.

Trusting your gut feeling is not always sensible. Signing a bad contract can cost thousands over the ownership course, so hire legal Help. Legal Help in the entire marketing franchise acquisition process helps to identify issues.