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How to Draft a Business Franchise Agreement

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By Aditi Mukherji

franchise_agreementIf your small business is flourishing and you’re ready to expand into a franchise, congratulations are definitely in order! But so too are some legal considerations — especially when it comes to drafting a business franchise agreement.

As you know, a franchise agreement is essential to spell out each party’s obligations and protect your legal and financial interests.

Here’s how to draft a business franchise agreement — or at least, how to get a solid start.

Franchise Agreement Basics
Here’s a general overview what most franchise agreements need to cover:

Territory restrictions. The agreement must state if there are territory restrictions for the operator. Many agreements restrict how many of the same businesses can operate within a certain radius to protect the profits of the operator. Additionally, the contract should spell out if there are any state restrictions on where the business can operate.

Fees. All fees for using the franchise name and products must be stated in the franchise agreement. Additionally, specify the percentage of the profits that must be submitted to the parent company, as well as any licensing fees, copyright fees or other fees associated with using the name of the franchise. You should also include payment due dates and financing options.

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