Free Legal Contract Franchise Agreement Template
Legal Contract Franchise Agreement
This Franchise Agreement ("Agreement") is entered into as of [Insert Date], by and between [Your Company Name], a [State] corporation with its principal place of business located at [Your Company Address] ("Franchisor"), and [Franchisee Organization Name], a [State] [entity type] with its principal place of business located at [Franchisee Address] ("Franchisee").
WHEREAS, Franchisor owns and operates [Brand Name] ("Brand"), a recognized brand in the [specific industry or sector], offering [describe products/services] to consumers through a network of franchised and company-owned outlets;
WHEREAS, Franchisee wishes to obtain a franchise to operate a Brand outlet and has the necessary business acumen, experience, and financial resources to establish and operate such a franchise successfully;
WHEREAS, Franchisor desires to grant Franchisee a franchise to operate a Brand outlet, subject to the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants, and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
I. Definitions
A. "Franchise" refers to the authorization granted by Franchisor to Franchisee to operate a Brand outlet, including the right to use the Brand trademarks, service marks, business systems, and operational procedures.
B. "Territory" means the designated geographical area within which Franchisee is authorized to operate the Brand franchise, as specified in Exhibit A attached hereto.
C. "Operations Manual" is a confidential manual provided by Franchisor detailing the operational procedures, standards, and specifications for running a Brand franchise.
D. "Initial Franchise Fee" is the fee paid by Franchisee to Franchisor for the grant of the franchise, training, and initial support services.
E. "Royalties" are ongoing payments made by Franchisee to Franchisor, calculated as a percentage of the Franchisee's gross sales.
F. "Marketing Fund" refers to a fund into which Franchisee contributes a percentage of gross sales for national and regional advertising and promotional efforts.
II. Grant of Franchise
A. Franchisor hereby grants to Franchisee, and Franchisee accepts, a franchise to operate a Brand outlet within the Territory, subject to the terms and conditions of this Agreement.
B. Franchisee shall operate the franchise exclusively within the Territory and shall not solicit or accept business outside the Territory without Franchisor's prior written consent.
C. Franchisee is granted a non-exclusive right to operate the franchise. Franchisor reserves the right to operate or grant franchises to other franchisees within the Territory.
III. Term and Renewal
A. The initial term of this Agreement shall commence on the date hereof and shall continue for a period of 10 years, unless earlier terminated in accordance with the provisions hereof.
B. Franchisee shall have the option to renew this Agreement for one additional term of 10 years, provided that Franchisee is not in default of any provision of this Agreement and agrees to sign Franchisor's then-current form of franchise agreement, which may contain different terms and conditions.
C. To exercise the renewal option, Franchisee must give Franchisor written notice of its intention to renew at least 180 days prior to the expiration of the initial term.
IV. Fees and Other Payments
A. Franchisee shall pay to Franchisor an Initial Franchise Fee of $50,000 upon the execution of this Agreement. This fee is non-refundable and covers the rights to use the Brand trademarks, initial training, and support in setting up the franchise.
B. Franchisee agrees to pay ongoing Royalties to Franchisor amounting to 6% of the Franchisee's gross sales. These payments are due monthly and must be paid by the 10th day of the following month.
C. In addition to the Royalties, Franchisee is required to contribute 2% of gross sales to the Marketing Fund. Contributions to the Marketing Fund are due monthly, along with the Royalty payments.
V. Training and Support
A. Franchisor will provide Franchisee with an initial training program, which is mandatory for Franchisee and its designated manager. The training program will last for two weeks and will take place at Franchisor's corporate headquarters or a designated training facility.
B. Franchisor will provide ongoing support to Franchisee, including but not limited to, operational advice, marketing strategies, and access to preferred suppliers. Support will be available through Franchisor's dedicated support line and via regular visits from Franchisor's field support representatives.
C. Franchisor will also provide Franchisee with access to an annual conference, where Franchisee will receive updates on the Brand system, new marketing initiatives, and opportunities to network with other franchisees.
VI. Operations Manual and Standards
A. Franchisee shall operate the franchised business strictly in accordance with the Operations Manual, which outlines the required standards and specifications for operating a Brand franchise. The Operations Manual is confidential and remains the property of Franchisor.
B. Franchisor reserves the right to modify the Operations Manual from time to time to reflect changes in branding, operational procedures, or system improvements. Franchisee must implement any such changes within 30 days of notification.
C. Franchisee must ensure that the franchised business complies at all times with all applicable laws, regulations, and standards, including but not limited to, health and safety, employment, and environmental standards.
VII. Site Development and Design
A. Franchisee is responsible for selecting a site for the franchised business within the Territory, subject to Franchisor's approval. The proposed site must meet Franchisor's then-current site selection criteria and be approved in writing by Franchisor before any lease is signed or purchase is made.
B. Upon approval of the site, Franchisee must develop and construct the franchised business in accordance with Franchisor's design and appearance standards. Franchisee is responsible for all costs associated with the development and construction of the site, including but not limited to, architectural fees, construction costs, and equipment purchases.
C. Franchisee must complete the development and construction of the franchised business and commence operations within 180 days from the date of site approval by Franchisor. Failure to meet this deadline may result in termination of this Agreement at Franchisor's discretion.
VIII. Marketing and Advertising
A. Franchisee is required to spend a minimum of 3% of its gross sales each month on local marketing and advertising of the franchised business. Franchisee must submit a quarterly marketing plan to Franchisor for approval and must comply with Franchisor's branding and advertising guidelines.
B. Franchisee's contributions to the Marketing Fund (as outlined in Section IV.C) will be used by Franchisor to conduct national and regional advertising campaigns, develop promotional materials, and otherwise promote the Brand. Franchisee has no right to dictate the use of these funds but may suggest initiatives to Franchisor.
C. Franchisor will provide Franchisee with access to approved marketing and promotional materials, which Franchisee may use in its local advertising efforts. Franchisee may also create its own marketing materials, subject to Franchisor's prior written approval.
IX. Supply Chain and Purchasing Requirements
A. Franchisee is required to purchase all products, supplies, and equipment necessary for the operation of the franchised business exclusively from suppliers approved by Franchisor. Franchisor will provide Franchisee with a list of approved suppliers, which may be updated from time to time.
B. Franchisor reserves the right to establish purchasing cooperatives and require Franchisee's participation therein. Participation in such cooperatives may provide cost savings and ensure uniformity in the quality of products and services across the franchise system.
C. Franchisee must adhere to Franchisor's specifications and standards for all products and services offered at the franchised business. Unauthorized products or services may not be sold or offered by Franchisee.
X. Sales Reporting and Financial Disclosures
A. Franchisee is required to submit monthly sales reports to Franchisor by the 5th day of the following month. These reports must detail the gross sales for the preceding month and any other financial information requested by Franchisor.
B. Franchisee must allow Franchisor to access, upon reasonable notice, all financial records related to the operation of the franchised business. Franchisor may conduct audits of these records up to twice per year to ensure compliance with the terms of this Agreement.
C. Franchisee agrees to prepare and maintain accurate financial statements in accordance with generally accepted accounting principles (GAAP). Annual financial statements must be provided to Franchisor within 90 days of the fiscal year-end.
XI. Intellectual Property
A. Franchisor grants Franchisee a non-exclusive, non-transferable license to use the Brand trademarks, service marks, and related intellectual property in the operation of the franchised business during the term of this Agreement.
B. Franchisee acknowledges Franchisor's ownership of all intellectual property rights related to the Brand and agrees not to challenge these rights or use the Brand intellectual property in any manner not expressly authorized by this Agreement.
C. Upon termination or expiration of this Agreement, Franchisee must cease all use of the Brand intellectual property and return any materials containing the Brand trademarks or proprietary information to Franchisor.
XII. Insurance
A. Franchisee must obtain and maintain, at its own expense, comprehensive general liability insurance with a minimum coverage amount of $1,000,000 per occurrence and $2,000,000 in aggregate, naming Franchisor as an additional insured party.
B. Franchisee is also required to maintain property insurance covering the full replacement cost of the premises and contents, workers' compensation insurance as required by law, and any other types of insurance Franchisor deems necessary.
C. Proof of insurance must be provided to Franchisor prior to the opening of the franchised business and upon renewal of each policy. Franchisee must notify Franchisor within 5 days of any cancellation, modification, or expiration of any insurance policy.
XIII. Compliance with Laws and Regulations
A. Franchisee shall comply with all federal, state, and local laws, regulations, and ordinances applicable to the operation of the franchised business. This includes, but is not limited to, health and safety standards, employment laws, and any industry-specific regulations.
B. Franchisee is responsible for obtaining and maintaining all necessary permits, licenses, and certifications required for the operation of the franchised business. Proof of compliance must be provided to Franchisor upon request.
C. In the event of any violation of laws or regulations, Franchisee must promptly take all necessary corrective actions and inform Franchisor of the violation and measures taken to rectify the situation within 10 days of becoming aware of the violation.
XIV. Default and Termination
A. This Agreement may be terminated by Franchisor if Franchisee fails to comply with any of its terms and conditions, including failure to make timely payments, breach of brand standards, or violation of laws. Franchisee will be given a written notice of default and will have 30 days to cure the default. If the default is not cured within this period, Franchisor may terminate the Agreement immediately upon subsequent notice.
B. Either party may terminate the Agreement upon 90 days written notice if the other party becomes insolvent, files for bankruptcy, or ceases business operations.
C. Upon termination, Franchisee must cease the use of all Brand trademarks and proprietary information, and return all operations manuals and other materials provided by Franchisor. The Franchisee is required to de-identify the franchised business from the Brand franchise system within 30 days of termination.
XV. Dispute Resolution
A. In the event of a dispute arising under or relating to this Agreement, the parties agree to first attempt to resolve the dispute through direct negotiation. If the dispute cannot be resolved within 60 days of initiating negotiations, either party may propose to enter into mediation.
B. If mediation does not resolve the dispute, the parties agree to submit the dispute to binding arbitration in accordance with the rules of the American Arbitration Association. The arbitration shall take place in the state where the Franchisor's principal place of business is located, and the decision of the arbitrator(s) shall be final and binding.
C. Notwithstanding the foregoing, either party may seek injunctive relief in a court of competent jurisdiction to prevent irreparable harm or to maintain the status quo pending arbitration.
XVI. Transferability
A. Franchisee may not sell, assign, transfer, or otherwise dispose of the franchised business, its rights under this Agreement, or any interest therein, without the prior written consent of Franchisor. Such consent shall not be unreasonably withheld, but Franchisor may condition consent on the proposed transferee meeting Franchisor's then-current qualifications for new franchisees and on the transferee's agreement to assume all of Franchisee's obligations under this Agreement.
B. In the event of a proposed transfer, Franchisee must provide Franchisor with at least 60 days' prior written notice, along with complete information and financial data concerning the proposed transferee.
XVII. Miscellaneous Provisions
A. This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement.
B. Any notices required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been properly given if sent by registered or certified mail, return receipt requested, to the address of the other party set forth in this Agreement, or to such other address as may be specified in writing.
C. No amendment, change, or variance from this Agreement shall be binding on either party unless mutually agreed to in writing and signed by both parties.
D. If any provision of this Agreement is found to be invalid or unenforceable, the remaining provisions shall remain in full force and effect.
XVIII. Governing Law
A. This Agreement shall be governed by and construed in accordance with the laws of the State of [State], without regard to its conflict of laws principles.
Signatures
IN WITNESS WHEREOF, the parties hereto have executed this Franchise Agreement as of the date first above written.
Franchisor
[Signature]
[Your Name]
[Title]
[Date]
Franchisee
[Signature]
[Name]
[Title]
[Date]
