What goes into a franchise contract?

The franchise contract is the all-important document that binds the franchisor and his franchisee together, for better or for worse.

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franchise contract

Franchise contract

The terms of the franchise contract are frequently for a period of 10 to 20 years and should include provision for renewal at the time of termination.

It is important that the contract covers all matters relating to the operation, including the rights to inspect and audit.

It should cover all possible eventualities. What happens if the franchisee wants to sell out? What happens if he dies? What happens if his particular operation is unsuccessful? Have assets and equipment been assigned to the franchisor in case of default by the franchisee?

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The contract should also deny the franchisee any opportunity to compete with the franchisor, or to introduce products or services that are not approved. It should also include non-disclosure clauses to prevent operational and financial information from falling into outside hands.

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