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How do you know if your franchise agreement is fair and balanced?

On Behalf of | Nov 22, 2023 | Franchise Agreements

Your franchise agreement is a contract that defines the rights and obligations of you and the franchisor. It is an essential document in establishing a successful and mutually beneficial franchise relationship.

Unfortunately, not all franchise agreements are created equal. Some may contain unfair or unreasonable terms that can put franchisees at a disadvantage or expose them to unnecessary risks.

3 warning signs to watch for

When franchise agreements greatly favor franchisors, franchisees risk financial loss and reputation damage, not to mention the anxiety and stress of it all. Watch out for these potentially unfair contract terms when reviewing your franchise agreement.

  • Excessive fees. Beware of franchise fees that seem unreasonable and not in line with the industry standard.
  • Restrictions on competition. Avoid a franchise agreement that restricts your ability to compete with other businesses.
  • Unreasonable termination clause. Think twice if the contract empowers the franchisor to terminate the agreement without cause or proper notice.

Basically, any provision that may result in a substantial imbalance in the obligations and rights of the involved parties needs another look.

A thorough review can prevent disaster

An ideal franchise agreement balances the interests and expectations of everyone. It should provide the franchisee the right to use the franchisor’s proven business model, brand name and support system. Just as importantly, it should allow the franchisee some autonomy and flexibility to operate their business successfully.

Any contract you sign as a business owner can contain unfavorable provisions, including your franchise agreement. A careful review under legal guidance can help to ensure your business gets off to a good start.

NOTICE: This blog is intended solely for informational purposes and should not be construed as providing legal advice. Please feel free to contact us with any questions you may have regarding this blog post.