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What are some important clauses in a franchise agreement?

Buying a franchise is a huge undertaking. While you may start off in a better place than building a business from the ground up, there are many details of the franchise agreement that you need to understand.

You are taking on the job of representing a brand, which is a serious step. Due to this, the parent company will likely have a lot of rules for you to follow. The provisions in your franchise agreement will spell out important concepts and rules you need to understand.

Territory

One of the most important aspects of a business is location. If you do not have your business in a good spot, you probably will not be able to keep the doors open long. Your franchise agreement should outline your territory, including whether you will have competition from another store within the brand.

Fees

Make sure you understand every single cost that will go into the agreement. You may have multiple provisions covering the fees you will have to pay. You need to read them well and ensure you know exactly how much money the parent company will take from you.

Training

Because you are working under the umbrella of an existing business, and one that likely has a carefully cultivated public image, you will need to undergo some training. You have to learn how to operate your franchise to meet expectations and learn about common practices within the company. Typically, this process will be in your agreement as training. It should detail where and when you will have to attend training sessions. Make sure to note these. They are usually not negotiable or voluntary.

There are many other provisions you should watch out for, including how to use the company’s logo, advertising rules and how to terminate the agreement. But as long as you read through the franchise documents and ensure you understand them, you should be able to get things off on the right foot.

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