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MAKING BUSINESS CONTRACTS

FRANCHISE AGREEMENT QUESTIONNAIRE

One popular way to get started in your own business is through a franchise.  A franchise is a business organization in which a well-known firm with a successful product or service—the franchisor—enters into a contractual relationship with another business—the franchisee—that operates under the franchisor's name in exchange for a fee.  Fast food restaurants are commonly operated as franchises.  Before you enter into a franchise agreement, consider the following questions, and go over your responses with your attorney.

COST OF THE FRANCHISE

How much is the initial franchise fee?  $_____________ 

Refundable  ___  Nonrefundable  _____

What does the initial fee purchase?

Is a lump-sum payment required? 

Are installment payments allowed?  How many? 

Payment due dates 

Is franchisor financing available?  Interest rate

Are periodic royalty payments required? 

How often?                   How are they calculated? 

Does the franchisor provide accounting services?    

For an additional fee?  Yes  ___  No  ___  How much?  $_________

How are advertising costs divided between the franchisor and franchisee? 

Is advertising national, regional, or local?

What other services does the franchisor provide?

How is the franchise premises obtained?  Purchase  ___  Lease  ___

Is financing available from the franchisor for the purchase of the premises? 

Yes  ___  No  ___         Interest rate  _________

How much of a down payment is required?  $

How much are the rent payments?  $_____________  Due on _______________

 

FRANCHISE LOCATION

What geographic area is encompassed by the franchise? 

How far away is the nearest existing franchisee of the same franchisor? 

Are other franchises planned for the same geographic area in the future? 

If so, provide details 

Who selects the site for the franchise?  Franchisor  ___  Franchisee  ___

Can the franchisee use his or her own property for the franchise? 

If the franchise premises require new construction, who determines the plans and specifications for the building?  Franchisor  ___  Franchisee  ___

Who supervises construction and works with the contractor and subcontractors?  Franchisor:   Franchisee: 

What are the specifications for and restrictions on the appearance and configuration of the premises? 

Who provides property insurance on the premises?  Franchisor  ___  Franchisee  ___

What are the franchisee’s responsibilities relating to remodeling?

What restrictions does the franchisor place on remodeling?

 

OPERATING TERMS

Must all equipment and supplies be purchased from the franchisor? 

If not, must purchases be approved by the franchisor? 

How much control does the franchisor maintain over day-to-day operations? 

What aspects of the business are left to the discretion of the franchisee? 

Are hours and days of operation dictated by the franchisor? 

Are products and services strictly controlled by the franchisor?

Must the franchisee remain personally involved in running the franchise, or can the management duties be delegated? 

 

ADDITIONAL CONSIDERATIONS

Does the franchisor provide initial training? 

Does the franchisor provide on-going training? 

Under what conditions may the franchisor terminate the franchise? 

What are the franchisor’s duties and obligations to the franchisee in the event of such termination?

Under what conditions must the franchise be renewed? 

What happens to the franchisee’s interest if he or she dies? 

Is the franchise assignable? 

How long has the franchisor been in business? 

How many total franchises are there? 

Are these franchises financially successful? 

How long did it take them to become profitable? 

Has the franchisor complied with all applicable state and federal laws and regulations? 

Other questions to ask my attorney:

 

 

 

 

 

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