What things should I look for in a franchise agreement and disclosure documents?

When reviewing a franchise agreement and disclosure documents, here are some important things to look for:

  1. Fees: Look at the initial franchise fee, ongoing royalties, and any other fees that you will be required to pay. Make sure you understand what you are paying for and how these fees will be used.
  2. Territory: Look at the geographic territory that the franchisor is granting you. Make sure it is clearly defined and that you understand any restrictions on your ability to operate outside of this territory.
  3. Term and Renewal: Look at the length of the franchise agreement, and any renewal options that are available. Make sure you understand what conditions must be met in order to renew the agreement.
  4. Intellectual Property: Look at how the franchisor is licensing their trademarks, trade secrets, and other intellectual property to you. Make sure you understand any restrictions on how you can use this intellectual property.
  5. Operations Manual: Look at the franchisor’s operations manual to understand how they want you to run your business. Make sure you are comfortable with the procedures they require you to follow.
  6. Termination and Transfers: Look at the conditions under which the franchise agreement can be terminated, and any restrictions on your ability to transfer or sell your franchise.
  7. Financial Performance: Look at the franchisor’s financial performance representations, if any. Make sure you understand how they arrived at these figures and what assumptions they are making.
  8. Litigation History: Look at the franchisor’s litigation history to understand any legal issues they have had with their franchisees.
  9. Support and Training: Look at the level of support and training that the franchisor will provide you. Make sure you understand what resources will be available to you as a franchisee.

It is important to thoroughly review the franchise agreement and disclosure documents with the assistance of a lawyer or other professional advisor before signing any agreement. If you have any questions, you may contact our franchise lawyers at info@falconlawyers.ca or 1-877-892-7778.

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