Going into business for yourself is often a daunting challenge.  Some people feel more comfortable using an existing business opportunity to chart their own future.  This means one thing: a franchise.  Whether you plan on opening your own franchise outlet, or your own business is preparing to allow others to open franchises, you’ll need the appropriate agreements.  Before you begin a new franchise business or license your own business to franchisees, here is what you need to know:

WHAT IS A FRANCHISE?  A business that sells ‘copies’ of itself to other owner-operators is a franchise.  Whether it’s fast food, a DVD rental outlet or a chain store, a franchise is a proven and effect marketing strategy that can offer customers consistent quality of goods or services.  This benefits potential franchise owners by allowing them access to a pre-existing customer base who are already familiar with the business.  It also benefits the franchisor by allowing them to expand the business without having to do as much work.

WHAT IF I WANT TO START A FRANCHISE?  A franchisee (a person who starts a new franchise location) will be able to use the frinchisor’s (the original owner of the business that is being franchised) products, services, intellectual property and  other related property that comes with a pre-established business if they enter into a Franchise Agreement with the franchisor.  A new franshisee will be able to use that property for a period of time, or for a certain territory, depending on the terms of the agreement.  Potential franchisees must first obtain permission from the franchisor, and they can only do that with a proper agreement.

WHAT IF I WANT TO TURN MY BUSINESS INTO A FRANCHISE?  If your business is expanding and seeking new independent owners to operate as franchisees, you’ll need to make it clear what you are offering.  By drafting a Franchise Agreement, you can let potential owners know what it is they will and won’t be getting.  You will also be able to lay out terms for payment, territory, and the obligations of one party to another.   

CAN MY FRANCHISE BE TAKEN AWAY FORM ME?  Depending on the conditions stated in the Franchise Agreement, your right to operate your franchise business may be limited.  If you violate certain rules, you may be stripped of the franchise entirely.  A new franchisee must be aware of all the terms of the agreement before they enter into it, or they are acting imprudently. 

WHAT NEEDS TO BE INCLUDED IN A FRANCHISE AGREEMENT?  Both the franchisee and franchisor need to understand what they can or cannot do under the terms of the Franchise Agreement.  A properly drafted agreement details the terms of the franchise grant, how the sale of the goods or services must be conducted and how intellectual property can be used.  Many factors must be included and stated clearly for the Franchise Agreement to be succesfull.

Starting a business can be an exciting time in your life.  Taking advantage of a franchise opportunity can not only provide you with significant advantages, but it can also serve as a safety net.  Knowing the product you are going to sell is already known and well received  can be a great benefit.  No matter if you are entering into business as a Franchisee or selling to new owners, having a strong Franchise Agreement is a necessary step, and one that lets you be confident in the foundation of your new enterprise. 

For more information and to download a DIY Franchise Agreement Template please click here