What is Franchise Agreement?

Legal Definition
A Franchise Agreement is a legal, binding contract between a franchisor and franchisee. In the United States franchise agreements are enforced at the State level.

Prior to a franchisee signing a contract, the US Federal Trade Commission regulates information disclosures under the authority of The Franchise Rule. The Franchise Rule requires a franchisee be supplied a Franchise Disclosure Document (FDD ) (originally called Uniform Franchise Offering Circular (UFOC )) prior to signing a franchise agreement, a minimum of ten days before signing a franchise agreement.

Once the Federal ten-day waiting period has passed, the Franchise Agreement becomes a State level jurisdiction document. Each state has unique laws regarding franchise agreements.

A franchise agreement contents can vary significantly in content depending upon the franchise system, the state jurisdiction of the franchisor, franchisee, and arbitrator.

It overall provides the investor with a product, a branded name and recognition, and a support system.

A typical franchise agreement contains

  • Franchise Disclosure Document (FDD)
  • Disclosures required by state laws
  • Parties defined in the agreement
  • Recitals, such as Ownership of System, and Objectives of Parties
  • Definitions, such as
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