Because an example franchise agreement is included as part of the franchise disclosure document it is sometimes confused with the FDD. The FA included in the FDD is not the same as the one you eventually sign if you decide to buy the franchise business.
The Franchise Disclosure Document is intended to disclose all information a prospective franchisee may need to make a well-informed decision about the franchise offering. The franchise agreement is a legally binding contract that, once signed, creates the franchise relationship. Having an example franchise agreement to review prior to closing on the franchise deal allows the prospective franchisee to be well informed about the content of the contract they will be expected to sign. The example contract is the same across the board for all franchisees and is for disclosure purposes only.
Every FDD issued by a franchisor is the same, but each franchise agreement is tailored to the specific prospective franchisee it is made for. This allows franchisors to keep their business operations cohesive and uniform while also changing key details as necessary for different locations or various situations.
Although many of the specifics in a franchise agreement may be different due to negotiations or tailored to specific situations they contain similar terms and provisions.
For instance, it provides targeted information within the context of legal obligations and gives specific details like territory and term length. It also defines and describes the franchisee’s obligations regarding royalties, marketing efforts, and operational region, operating systems, suppliers, and products in this contract.
Another key feature of a franchise agreement involves licensing and trademarks. The franchisor owns the rights to the name, logo, products, design, and every other aspect of the business. The franchise agreement should include details on the franchisee’s right to use these protected features in their day-to-day operations.
Franchise agreements do not just require the franchisee to adhere to certain requirements; there are also elements within the contract that outline the franchisor’s responsibilities. For instance, each franchise agreement will designate a franchisor’s duties involving ongoing support and training for franchisees.