The Franchise Agreement: What to Know Before Signing

Choosing a franchise opportunity is a big moment. It’s one of the biggest decisions of your career and maybe even one of the most impactful choices in your life. That brings both nerves and excitement, but there is still one final hurdle to clear before officially embarking on your ownership journey — the franchise agreement.

Through all of the paperwork, research, and calculations you’ve made to get to your final decision on business ownership, it can be easy to lose focus once you’re at the finish line. But, as with most documents in business, there are several points of key information that you need to confirm before signing the franchise agreement. Let’s break down what that document entails and which pieces of information you should double-check when making things official.

 

What is a franchise agreement?

The franchise agreement is a document that outlines specific expectations for both the franchisee and the franchisor. It is a legal document, meaning you should take the extra effort to look over the details and maybe have an attorney or experienced business advisor review it as well.

What should I look for in a franchise agreement?

No two franchise agreements are exactly the same. However, franchising as a concept can offer a fairly standard roadmap for the items to know about before signing. Here are a few of the most essential details to look for.

Financial Breakdown

The financial specifics are among the most important pieces of your relationship with the franchisor. You should have a clear understanding of the money you plan to invest in the business, from the initial franchise fee to start-up costs to fixed ongoing fees such as royalties or marketing. Knowing the pay structure will not only help you plan to get the business to profit but will help you better understand the value of what that investment can get you.

Licenses

One of the biggest reasons to join a franchise is to benefit from the foundation of its built-in brand strength. The agreement should clearly grant you a license to use trademarked material such as the brand’s name, logos, patents, and marketing.

These elements are what give franchisees so much of the value in their investment. Their business becomes synonymous with the brand through name, products, services, and operations. Customer loyalty is built on those foundational aspects, so making sure you have a license to use that branding is essential when reviewing the agreement.

Operations

When becoming part of a franchise, you are joining a business that has often curated a proven business model. That model is likely what attracted you to the business in the first place, so it is important to understand what the franchisor is expecting of you when running your business under their brand name.

The franchise agreement should designate certain operations you will use, from software you use to equipment to pricing strategies for products and services. The agreement also likely outlines the area or territory where your business can operate to avoid overlap with other franchisees. That location designation could specify the type of real estate or office space you use as well.

Support

Just as the agreement outlines the franchisor’s expectations for franchisees, it works the other way as well. Franchisees make a sizable investment and expect to get certain benefits in return. In addition to the ability to use branding and trademarked materials, support is a crucial aspect of the relationship in franchising.

Franchisors vary on the level of support they provide, but every agreement should outline how that support is made available. Whether it is training, assistance in location selection, software, or technical support, every franchisee should know what to expect from their corporate offices.

Duration

One key component of the franchise agreement is how long the agreement stands. That pre-determined period of time gives both the franchisor and franchisee a base knowledge of when to begin negotiating an extension or exit strategy.

As with most contracts, there are clearly defined terms for cancellation or termination of the partnership. It should describe how franchisees can renew their agreement and any guidelines for selling their franchise. Exit strategies differ in different franchises. Some franchises allow franchisees to sell their locations as they please, while others may want the franchisor to have the ability to buy back the franchise.

While the beginning of the agreement is an exciting time, it’s essential to understand the long-term picture in the event that things turn out differently than expected or you become ready for a change down the road.

What should I consider as red flags in a franchise agreement?

While every franchise must provide an agreement that serves as the legal document discussed earlier, each agreement is different because of the variations in business models from brand to brand. If you have noticed that your franchise’s agreement is unusually nondescript and doesn’t account for the specific workings of the franchisor-franchisee relationship, that creates several questions to ensure what you’ve learned in your discovery process is actually delivered when you purchase your franchise.

Additionally, franchisors must give franchisees a reasonable period of time to review all the documents before signing, including the most up-to-date Franchise Disclosure Document that provides a clear picture of the franchise model and financial expectations. Franchisees should have two weeks to review the FDD and a week to review the Franchise Agreement once it is issued.

Join a trustworthy and transparent franchise with Fish Window Cleaning!

As mentioned above, the franchise agreement should provide a clear picture of your investment and the opportunities that investment affords your business. At Fish Window Cleaning, we pride ourselves on transparency throughout the entire franchising process, from your first initial research into our system to the support we provide years into our relationship. Many of our franchisees entered the process with curiosity about a window and gutter cleaning franchise; and committed to our brand because they trust that we execute the expectations laid out in the franchise agreement.

For those interested in learning more about franchising with Fish Window Cleaning, contact us today by calling 877-707-3474 or visit our website at www.fishwindowcleaning.com/franchise/ and request more information about the opportunities.