Franchise Agreements: A Franchisee’s 10 Point Checklist

Whether it’s a Subway franchise agreement, a Goodyear Autocare franchise agreement or a Clark Rubber franchise agreement, all franchise agreements have the same important factors to consider. A new franchisee (you) must understand these and be very confident that you are able to meet the obligations of the franchisor and that the franchisor is providing you with everything that you expect to operate the business successfully.

10 Key Issues for Franchise Agreements

In particular, you should consider whether the following key points are satisfactory to you:

1. the assistance you will receive from the franchisor for:
   1. supply of products or services;
   2. branding
   3. marketing;
   4. training;
   5. premises location and fit-out;
   6. computer systems;
   7. other systems;
   8. intellectual property (brand, business name, trade marks)
2. all the fees and payments you are required to pay (in particular, pre-payments, establishment costs and recurring costs) and the manner in which they are calculated;
3. the term (length) of the franchise;
4. your ability to use the branding (i.e. intellectual property) of the franchisor;
5. the territory; what you can do in and out of the territory and what others (including the franchisor) can do in the territory;
6. minimum performance criteria
7. the records you are required to keep and the reports you are required to provide;
8. any prohibition on your ability to undertake any activity during or after the term;
9. the products and services you can sell, must sell or can’t sell and where you must source those products;
10. how the agreement can be terminated by the franchisor and what happens when the agreement ends (e.g. what happens to the good will and who owns the customers).

You must ensure that all of these issues are dealt with to your satisfaction. If not, you jeopardise the success of your business.