They may be sued, not only for unpaid fees, but also for loss of the franchisor`s income for the duration, as this would likely lead to the termination of the contract. You should cease trading immediately and restrictions may apply to the operation of a competing activity, so you may not be able to afford to defend a claim from the franchisor. The franchisor would generally have the right to enter your premises and enforce the terms of the contract. You can also be expected to contribute to national marketing campaigns. One of the greatest advantages of a franchise is the use of a recognized brand. However, this mark is affected and maintained by federal actions. This marketing activity will be very valuable to your business and as a result you are expected to invest in it. The agreement should provide for the franchisor`s obligation to assist franchisees in marketing and advertising. Unfortunately, some agreements are more demanding for franchisees than for franchisors. In some franchises, the franchisee is obliged to spend a certain percentage on local advertising, but the franchisor is remarkably free of hard and fast obligations! An integral part of the deductible is the payment of a first pre-feeding tax to the franchisor, which is simply known as a “deductible fee.” The franchise fee is intended to cover the initial installation costs of the franchise, the training of the franchisee and the hiring, if necessary. The fee may also cover any professional costs or fees that may be incurred in the early stages of installation. However, the franchisor should not take advantage of the franchise fees, which is only used to cover the costs.
Duration of agreement: Then, make sure that the duration of the franchise agreement is clearly defined. How long is it – five, ten or twenty years? Is it renewable if the original contract expires? If the contract is renewable, how much do you have to pay? Is it the full fee deductible or is it enhanced for a renewal? Convention of territorial representation – designates and appoints a representative of the third territory as the special representative of the franchisor in a given territory. Under a territorial representation agreement, the representative of the territory pays a prepayment, which depends on the extent and size of the territory designated by the representative of the territory, acting in exchange for the achievement of the objectives of the franchise and as the franchisor`s representative for training and assistance to franchisees. As a general rule, the representative of the territory is compensated on the basis of a percentage of the initial franchise fees and outstanding royalties paid by franchisees within the designated territory.