A restaurant franchising agreement can be a dense and complex contract. Whether you are hiring a lawyer or handling the contract yourself, here are some crucial items that should be negotiated.
Here are some of the most important items that are included in a restaurant franchise agreement.
A franchisee’s territory is the area in which the franchisor devotes to a specific franchisee. This means there will not be any other stores from your brand nearby, so focuses stay on your storefront.
For extremely popular franchises such as McDonald’s or Starbucks, exclusive territories are smaller because consumer demand is much higher. On the contrary, less popular brand franchises need larger territory sizes to help ensure the success of the location.
A franchisee’s renewal rights are often the cause of the messiest conflict between themselves and the franchisor. This most often occurs when a franchisee is successful, as the franchisor often finds it to be in his or her best interest to reacquire that particular location and enjoy a larger portion of the profits.
Be aware of this as you are drawing up your agreement with the franchisor. Plan to have a successful store, and make sure that you negotiate a contract that makes it very easy for you to renew when your initial contract expires.
When opening franchise locations, the success of a grand opening is crucial.
Opening Dates set the tone and reputation of your storefront, which is extremely important to consumers. A first impression is only obtainable once, and I recommend taking plenty of time to open your storefront properly.
In addition, franchisors have top notch expectations for their brand’s franchisees. They expect storefronts respect the brand image, and they hold those expectations to the highest standards. Becoming a franchisee is a wonderful partnership due to established brand recognition. However, you are expected to prioritize your franchisor’s expectations.
In short, franchise agreements need to be carefully negotiated in order to assure the long-term well-being of the franchisee. Listed above are only a few important clauses to emphasize with your legal team.
We recommend you continue to do your own research. The reward of franchising can be very lucrative and, if executed properly, is well worth the risk. We hope you are more informed on the important clauses of franchising agreements, and we wish you the best in your endeavors.