04 May IDENTIFY THE AGREEMENTS BENEFITS AND REQUIREMENTS OF THE FRANCHISOR AND FRANCHISEE.
Select one of the franchise agreements posted by your classmates in the franchise agreement wiki. Identify unique aspects of the agreement. Why do you think this franchise agreement was written with these requirements? Why would you buy/not buy this franchise based upon the factors that you discovered? Review the comments posted by three of your classmates and provide your own analysis.
Answer this question
Class, did you know that a Franchise Agreement is a legal, binding contract between a franchisor and franchisee, enforced in the United States at the State level.
Prior to a franchisee signing a contract, the US Federal Trade Commission regulates information disclosures under the authority of The Franchise Rule. The Franchise Rule requires a franchisee be supplied a Uniform Franchise Offering Circular (UFOC) or Franchise Disclosure Document (FDD) prior to signing a franchise agreement, a minimum of ten days before signing a franchise agreement.
Once the Federal ten day waiting period has passed, the Franchise Agreement becomes a State level jurisdiction document. Each state has unique laws regarding franchise agreements.
Can you add your insight to this?
2 – 2: Find a franchise agreement. Identify the agreements benefits and requirements of the franchisor and franchisee. Would you buy this franchise?
Example 1
The franchise agreement I looked at is for Chilis Bar and Grill Restaurant. There are six main requirements of the franchisor in this agreement. These requirements include that the franchisor will; provide the initial training of up to four managers, provide on-site pre-opening and opening supervision and assistance (which may include the opening crew), make available the research data on marketing and advertising and have the right to approve and disapprove all advertising, provide one copy of the Confidential Manual of Operating Data, provide advice and materials for managing and new developments for improvements in the restaurant business, and must seek to maintain the high standards of quality in appearance and service. The franchisee will pay the franchisor an initial franchise fee of $40,000. This will be split between the date of construction and ten days before the restaurant is to open for business. The franchisee will then pay the franchisor a monthly fee of four percent of the gross sales of the restaurant. Aside from payments, the franchisee is also responsible for other aspects such as be qualified and authorized to do business in each jurisdiction the business takes place. There are also many other requirements such as the responsibility for expenses due to training, using the restaurant building only for the restaurant business, and responsibility to maintain a competent and trained staff (Onecle 2014).
The agreement is forty-one pages long. Each section has many requirements and each requirement is a paragraph long. The agreement is very descriptive and seems to cover everything. It covers many different scenarios and offer very specific instructions, requirements, and responsibilities. I would look at data on the future of the restaurant before I decided whether or not to buy the franchise to see what type of future the restaurant is likely to have. Otherwise, I think this franchise is one to look at as a possible purchase.
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