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Aspects of the Franchise Agreement You Need to Understand Before You Sign

Many people develop a very poor habit in life. That habit is not reading and understanding the terms and conditions of a contract before signing it. It’s understandable why you might not always want to do that. Sometimes the contract isn’t that big of a deal and signing it won’t have a large effect on your life. However, when it comes to a franchise agreement, it would be very foolish if you signed your name without, at a minimum, understanding the following things.

Costs and Fees

According to Ceterus, joining a franchise is not free. There are generally upfront, one-time costs, and often a whole bunch of ongoing fees. These should all be clearly outlined in the franchise agreement. There are many benefits to joining a franchise, each of those benefits may come with a cost. You need to understand what benefits and costs are optional, and which are non-negotiable. You should also clearly understand the frequency at which certain fees must be paid. Once you understand all these things, you need to factor these costs into your financial planning. You don’t want to run into legal trouble because you forget to pay your franchise dues.

The Term of the Agreement

When you join a franchise, the franchise is going to provide you with a lot of resources and industry secrets. For the franchise to benefit from sharing these things with you, they need you to stick around. Your franchise agreement will have a term that stipulates how long you must remain a member of the franchise. According to Franchise Gator, most agreements usually last 10–20 years. For the extent of the term, your business will have to abide by all the limitations and restrictions in the contract. If you enjoy being part of the franchise, you can easily renew the agreement once the original expires.

Limitations and Restrictions

One of the major benefits of joining a franchise is having a name and brand that is recognized by the public. For the franchise to maintain their good name and brand, according to The Balance Small Business, they have to make sure that each franchisee abides by certain guidelines. This means that you may have to follow certain limitations and restrictions on how you conduct your business. These restrictions aren’t meant to cause inconvenience, they are meant to ensure that you enjoy the benefits of staying true to the name and brand you carry. You must understand what limitations and restrictions are defined in your franchise agreement. This will help make sure that you keep everything in order and don’t land in hot water for violating your agreement.

The franchisor that is offering you the franchise agreement wants you to succeed. If you have questions or concerns about the agreement, ask them. You must develop an open and honest relationship with your franchisor. If you want an unbiased opinion, consult with a lawyer that specializes in franchise law. They will be able to assist you in understanding the language in your contract.
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