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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 _______________
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?
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?
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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