How to Create Franchise Agreements for a Prospective Buyer

By eHow Business Editor

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A franchise agreement is a legally-binding contract that outlines all aspects of the franchisor-franchisee relationship. From the specific role of each party to royalties and training programs, these agreements aim to ensure that each party knows exactly what is expected. When it comes to preventing litigation, creating the franchise agreement is an important step.

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Instructions

Difficulty: Challenging

Step1

Include a detailed summary of your franchise operations so that the prospective buyer will have a clear picture of your business, your products and your expectations. This also allows them to follow the standards you've set.

Step2

Discuss in detail how your training program works, what types of support systems are available, the repercussions for terminating the agreement, royalty fees and appropriate advertising techniques.

Step3

Detail your Franchise Advisory Council's purpose, role and organizational structure in the agreement, if you have such a council.

Step4

Talk to your franchise attorney about other important details that need to be included in the franchise agreement. It's important that the document addresses all issues and leaves no loopholes for future litigation.

Step5

Keep the document as clear and concise as possible. By avoiding legal jargon and complex terminology, you'll lower the risk of potential buyers misunderstanding the information you've provided.

Tips & Warnings

Expect to spend 1 to 3 weeks creating the franchise agreement. However, there is no standard format for creating franchise agreements because of the differences that exist between businesses. This means you must take the time to individually create franchise agreements for a prospective buyer. Using a template would be ineffective and unacceptable.
Don't risk the future of your franchise by writing the franchise agreements yourself. With the assistance of an experienced franchise lawyer, you can be sure that your document is both complete and as fair as possible for you and the buyer.