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What should I expect to be outlined in a franchise contract?
The agreement should set out the term of the franchise, which tells you how long you’ve been given to operate the business. There may be rights to renew the franchise agreement at the end of the term. If so, the agreement should specify the length of the renewal term and the conditions that will need to be satisfied in order to obtain the renewal. There should be a grant clause that will set out the rights that you have been granted by the franchisor. The agreement should also give you the right to sell your business subject to certain conditions, which should be set out in the agreement. A clause should set out your financial obligations. These are usually divided into upfront fees and ongoing fees, such as management services fees and advertising contributions. You may be required to purchase goods or services from the franchisor, in which case, the franchisor’s terms of sale or supply should be set out. The agreement will also set out the franchisor’s obligations to you, initially to help set up the business and ongoing obligations to you to provide advice and assistance. There will also be a clause setting out your obligations as a franchisee. The agreement will set out the rights of the franchisor to terminate the franchise agreement. There will usually be a right to terminate immediately for the most serious breaches and for the right to have a period to remedy other breaches. The agreement should also set out the provisions that will apply on termination.
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