What Do Common Franchise Agreements Look Like?

Franchise-agreementsIn order to formally become a Franchisee of any franchise system, you will need to sign a franchise agreement. Franchise agreements are designed to build a stable foundation for your business and provide a framework through which it is possible to conduct business. While franchise agreements vary from company to company, each will contain some standard provisions that must be adhered to throughout the duration of the agreement, and as such they should be examined thoroughly before signing on the dotted line.

Training/Support 

The franchisor is invested in the success of the franchise system. The franchisors revenue is dependent on the franchisees ability to pay royalties and so they have a vested interest in seeing their franchisees succeed in promoting the brand and following the proven business model. To prepare their franchisees for success it is the franchisors responsibility to provide thorough training. Training will include marketing guidelines, administrative management, business planning, operations, technical training, and more.

Bin There Dump That has all brand new franchisees complete a 5-day comprehensive training program. Additionally, there is continued support from head office, which is crucial in the beginning stages of the businesses operations.

Rights and Exclusivity

In order to provide more opportunity for success, a good agreement should grant you exclusive rights over a defined amount of territory. This helps protect you from same franchise competition and gives you an opportunity to solidify your position within the marketplace. Moreover, the agreement will specify the duration of the contract as well as the responsibilities of the franchisee in operating the business.

Franchise Fees

Royalty fees of between 6%-9% (and often even higher) of gross sales are standard within common franchise agreements plus marketing and other operational fees. These are in addition to the initial franchise fee. The fees a franchisor requests should be clearly outlined so that there are no surprises.

Required Supplies & Purchases

Many franchise agreements will specify which products you are able to use within your franchise. These provisions can include everything from the dish soap in the kitchen to the cleaning tools you are required to use. In many cases, the company will have agreements with suppliers or manufacturers to supply these products, which can be beneficial as volume purchasing can decrease the cost for the individual franchisee.

Advertising/Marketing Protocols

A company’s brand is everything, and the franchisor will specify the types of marketing they will allow and often supply franchisees with a variety of pieces to customize and use locally.  Franchisors will often allow the franchisee to create their own materials but will include provisions on the use of the trademark, logo, and signage and images. Bin There Dump That is no different, but we involve our franchisees a lot in marketing, soliciting feedback and asking for ways to improve.

Renewal and Resale Rights

All franchisors have rules governing resale of a franchise as well as renewal rights. These details can be complex and we often recommend hiring a lawyer to review any franchise agreement you sign.

Investing in a franchise can be an efficient and effective method for opening a business. Like all businesses, success boils down to hard work, effort, and adherence to the provisions found within common franchise agreements.

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