Franchise Agreement - Template, Sample Form to Complete Pro · US-law

FRANCHISE AGREEMENT

State of ________

This Franchise Agreement (this "Agreement") is entered into and made effective as of the date set forth in the Execution section at the end of this document (the "Commencement Date"), by and between the following parties:

________, a corporation organized and existing under the laws of the State of ________ (hereinafter referred to as "Franchisor"), having a principal place of business located at:

________

and an email address of: ________; and

________, a corporation organized and existing under the laws of the State of ________ (hereinafter referred to as "Franchisee"), having a principal place of business located at:

________

and an email address of: ________.

Franchisor and Franchisee may be referred to individually as a "Party" and collectively as the "Parties."

REGULATORY DISCLOSURE ACKNOWLEDGMENT: Franchisee acknowledges and agrees that, in compliance with the Federal Trade Commission Franchise Rule (16 C.F.R. Part 436) and any applicable state franchise registration and disclosure laws, Franchisee received a complete copy of Franchisor's Franchise Disclosure Document ("FDD") at least fourteen (14) calendar days prior to the execution of this Agreement or the payment of any consideration to Franchisor, whichever occurred first. The date on which Franchisee received the FDD was ________.

RECITALS

WHEREAS, Franchisor owns a system (defined below, the "System") and proprietary marks (defined below, the "Proprietary Marks") designed to allow Franchisor to operate the following business (the "Business"):

________

WHEREAS, Franchisor licenses franchisees to operate businesses under certain terms and conditions using Franchisor's branded mark: ________;

WHEREAS, Franchisor sells certain products, as defined below (the "Products"), in connection with the Business;

WHEREAS, the System includes elements unique to Franchisor and the Business, including, without limitation, specifications, techniques, training methods, products, production methods, operating methods, designs, color schemes, furnishings, marketing materials, and business requirements intended to continually increase customer trust and goodwill in the Business;

WHEREAS, Franchisee desires to obtain a license to use Franchisor's System and Proprietary Marks in order to operate a business in accordance with Franchisor's guidelines; and

WHEREAS, Franchisor is willing to grant such a license based upon Franchisee's agreement to the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE 1 — DEFINITIONS

1.1 Proprietary Marks. The marks owned by Franchisor, including but not limited to Franchisor's branded mark, ________, and any and all other names, trademarks, service marks, logos, trade dress, or other commercial symbols or copyrighted materials belonging to Franchisor.

1.2 System. The conceptualization, specifications, design, marketing, operation, franchising, and licensing of the Business, including the expenditure of resources into the Business, for the purpose of commercial sale to the public.

1.3 New Franchisee Business. The new business to be owned by Franchisee that utilizes Franchisor's System and Proprietary Marks and is opened pursuant to this Agreement.

1.4 Term. The period during which this Agreement is in effect, as more specifically set forth in Article 9.

1.5 Gross Sales. All revenue derived from the New Franchisee Business at regular prices before any discounts or other allowances, together with all income of every kind related to the New Franchisee Business, the System, or the Proprietary Marks, the fair value of any non-monetary consideration received by Franchisee, and all proceeds of business interruption insurance policies for the New Franchisee Business. Gross Sales shall not include sales, excise, or other taxes added to the selling price of any item or service collected from customers and remitted to state or federal governments; however, any tax rebates received by Franchisee shall be included in Gross Sales. Gross Sales also specifically include any charged sales.

1.6 Territory. The specific geographic area in which Franchisee is permitted to operate the New Franchisee Business, described as follows:

________

1.7 Franchisor Marketing Materials. All advertising and promotional materials, including press releases, signs, copy, concepts, brochures, or other information used to advertise or market the Business and provided to franchisees for advertising purposes.

1.8 Products. The following products that Franchisor sells through the Business or through franchised businesses:

________

ARTICLE 2 — GRANT OF FRANCHISE

Subject to the terms and conditions of this Agreement, Franchisor hereby grants to Franchisee, and Franchisee accepts, a limited, non-transferable license to use the Proprietary Marks and the System to operate a single New Franchisee Business under the branded mark ________ within the Territory for the Term. The exclusivity of this license within the Territory shall be as follows: ________.

ARTICLE 3 — RESERVED RIGHTS

Franchisee acknowledges and agrees that this Agreement does not limit Franchisor's rights with respect to the Business. Franchisor and its affiliates, parents, subsidiaries, and related businesses retain all rights to develop, operate, promote, or otherwise exploit the Business, the System, and the Proprietary Marks, including through alternative channels of distribution. Franchisee acknowledges and agrees that it is not entitled to any exclusivity or territorial rights except as specifically set forth in this Agreement.

ARTICLE 4 — FEES

4.1 Initial Franchise Fee. Franchisee shall pay Franchisor an initial franchise fee (the "Initial Fee") in consideration of the rights granted herein and of the New Franchisee Business in the amount of $________ (________). The Initial Fee shall be paid as follows:

________

4.2 Failure to Pay. Should Franchisee fail to pay the Initial Fee or any portion thereof, Franchisor shall have the right to declare this Agreement null and void and to retain any portion of the Initial Fee already paid, to the extent permitted by applicable law, whereupon Franchisor shall have no further obligations to Franchisee under this Agreement.

4.3 Non-Refundable. Except as otherwise required by applicable law, the Initial Fee is non-refundable.

4.4 Periodic Franchise Fees. Franchisee shall pay Franchisor periodic franchise fees ("Franchise Fees") as follows:

________

4.5 Reporting. Franchisee shall report its Gross Sales to Franchisor accurately on a ________ basis, or on any other periodic schedule specified by Franchisor, in the manner Franchisor requires.

4.6 Royalties. Franchisee shall pay Franchisor a royalty for the use of the Proprietary Marks in the amount of $________ (________) per ________. Royalty payments shall be due as follows:

________

4.7 Late Payments. Any amount not paid when due shall bear interest at the rate of ________% per annum, or the maximum rate permitted by applicable law, whichever is less, from the due date until paid in full.

ARTICLE 5 — ADVERTISING

5.1 Franchisee shall use and prominently display the Franchisor Marketing Materials and Proprietary Marks solely in connection with the New Franchisee Business.

5.2 Franchisee agrees to the following guidelines for local advertising and marketing in connection with the New Franchisee Business:

________

Franchisor may request reports regarding Franchisee's advertising expenditures and activities at Franchisor's sole and reasonable discretion.

5.3 Franchisee shall not advertise or market the New Franchisee Business in any manner that may disparage or detract from the reputation of Franchisor. Franchisee shall submit all marketing materials for which it has not received prior approval to Franchisor for approval, which Franchisor will approve or deny within a reasonable period.

ARTICLE 6 — OPENING DATE

The Parties agree to an estimated opening date of ________ (the "Opening Date"). Notwithstanding the foregoing, Franchisee shall not commence operation of the New Franchisee Business until Franchisor has approved the specifications of the business as conforming to the terms and conditions of this Agreement.

ARTICLE 7 — BUILD-OUT

The Parties agree to the following approximate build-out schedule:

Date by which plans must be submitted: ________

Date by which build-out must begin: ________

Date by which build-out must be complete: ________

ARTICLE 8 — COMPLIANCE WITH SYSTEM

Franchisee shall strictly comply with Franchisor's System as communicated to Franchisee by Franchisor, whether in the form of a manual, training, or other written document. Any failure of Franchisee to comply with the System standards shall be grounds for termination of this Agreement in accordance with Article 9. The following are among the most important standards of adherence:

________

ARTICLE 9 — TERM & TERMINATION

9.1 The Term of this Agreement shall begin on the Commencement Date and shall end on the Expiration Date defined below, unless terminated sooner as provided in this Agreement. If the dates set forth in the Execution section differ, this Agreement shall be effective as of the later date on which both Parties have signed.

9.2 The Expiration Date shall be: ________.

9.3 If, for any reason, Franchisee does not open the New Franchisee Business by the Opening Date, Franchisor shall be entitled, at its sole election, to the following remedies:

a) Allow Franchisee additional time to open the New Franchisee Business, leaving the Expiration Date unchanged; or

b) Require Franchisee to enter into a new Franchise Agreement with a new Opening Date and possibly a new Expiration Date, at Franchisor's sole discretion.

9.4 Franchisor may terminate this Agreement for good cause, defined as any material breach of this Agreement. The following acts (a non-exhaustive list) shall constitute cause for termination, subject to any cure period required by applicable law:

a) Abandonment of the New Franchisee Business for ten (10) consecutive days, or any shorter period if Franchisor reasonably determines that Franchisee does not intend to continue operation;

b) Franchisee's bankruptcy or insolvency, to the extent permitted by applicable bankruptcy law;

c) Any levy made upon the New Franchisee Business;

d) Loss or termination of the right to occupy the physical space of the New Franchisee Business;

e) Franchisee's conviction of a felony or any criminal misconduct related to operation of the New Franchisee Business;

f) Franchisor's discovery of a material misrepresentation made by Franchisee in connection with this Agreement;

g) Any behavior by Franchisee that would impair Franchisor's trademark, trade name, or other commercially valuable intellectual property;

h) Any behavior by Franchisee that would reflect poorly on the reputation and goodwill of Franchisor or a failure to act in a commercially reasonable manner; or

i) Franchisee's failure to pay any fees, costs, charges, or other amounts due under this Agreement.

9.5 Franchisee shall be given written notice of termination in advance, stating the reasons for termination clearly. Franchisee shall be given an opportunity to cure to the extent required by applicable state franchise relationship or termination laws and where termination is not based on a non-curable cause set forth above. The applicable cure period shall be the greater of ________ days or the minimum period required by applicable law.

ARTICLE 10 — RIGHTS & OBLIGATIONS ON TERMINATION

Upon the expiration or termination of this Agreement, Franchisee shall:

a) Immediately cease all use of the Proprietary Marks and the System and return all manuals, specifications, forms, memoranda, training materials, advertising materials, instructions, and other materials bearing the Proprietary Marks to Franchisor; and

b) Remove all signs and advertisements identifying Franchisor or the Business from the New Franchisee Business and perform any remodeling or redecoration reasonably required by Franchisor to distinguish it from the Business.

Franchisor shall retain all fees and other monies paid pursuant to this Agreement. Franchisor shall also have the right, at its election, to purchase Franchisee's interest in any lease, physical space, furniture, fixtures, equipment, or other tangible assets at a purchase price equal to the lesser of Franchisee's cost or the then-fair market value of such property, as determined by an independent appraiser.

Any fees owed to Franchisor at expiration or termination shall be paid immediately. If termination results from Franchisee's breach or default, such amounts shall include all damages, costs, and expenses incurred by Franchisor as permitted by law.

Franchisor shall retain all rights and remedies after expiration or termination, and such expiration or termination shall not release Franchisee from any obligations existing at that time, nor terminate those obligations and liabilities which by their nature survive.

ARTICLE 11 — RENEWAL

If Franchisee wishes to renew the relationship at the end of the Term, Franchisee shall provide written notice of renewal to Franchisor at least one hundred eighty (180) days prior to the Expiration Date, requesting one additional Term as defined herein.

Franchisee acknowledges that the terms of any renewal agreement ("Renewal Agreement") may differ substantially, including royalty and franchise fees and other terms, at Franchisor's sole discretion.

To be eligible for renewal, Franchisee shall have satisfied each of the following conditions:

________

Notwithstanding satisfaction of such conditions, Franchisor shall be under no obligation to issue a Renewal Agreement, except as may be required by applicable state law. If a Renewal Agreement is offered, Franchisee shall execute it in a timely manner.

The Parties agree that this Agreement confers no automatic right to renewal, continuation, or a subsequent franchise agreement after the Expiration Date. If Franchisor elects not to renew, written notice shall be provided to Franchisee at least one hundred eighty (180) days in advance, or as otherwise required by applicable law.

If Franchisee enters into or extends any lease for the New Franchisee Business beyond the Term, Franchisee does so at its own risk.

ARTICLE 12 — FRANCHISOR'S OBLIGATIONS

a) Prior to the Opening Date, Franchisor shall provide initial training for Franchisee and certain of Franchisee's staff, at Franchisor's discretion. Franchisor is not obligated to train more than one person but may permit additional staff.

b) Prior to the Opening Date, Franchisor shall loan or otherwise provide a copy of the operations manual to Franchisee.

c) Prior to the Opening Date, Franchisor shall provide standard criteria for the design and configuration of the New Franchisee Business, including exterior and interior design and layout, fixtures, furnishings, equipment, and signage.

d) Prior to the Opening Date, Franchisor shall inspect the New Franchisee Business to determine reasonable conformity with Franchisor's requirements.

e) Franchisor shall provide such pre-opening and opening assistance and guidance as it deems appropriate.

f) Franchisor shall continue to make available Franchisor's Products for sale to Franchisee so that Franchisee may effectively operate the New Franchisee Business.

g) Franchisor shall provide advisory assistance from time to time, including information, data, manuals, techniques, and possibly materials regarding the New Franchisee Business and its operations.

ARTICLE 13 — RELOCATION OR OUTSIDE SALES

This Agreement grants Franchisee no right to relocate the New Franchisee Business, to use the System outside the New Franchisee Business, or to provide any services or sell any goods bearing the Proprietary Marks outside the Territory. Any occasional consent by Franchisor to engage in business outside the Territory shall not constitute a waiver of the foregoing. Franchisor may impose specific requirements applicable to any sales or services outside the Territory.

ARTICLE 14 — PROPRIETARY MARKS

a) Franchisor's Retained Rights. Franchisee acknowledges that Franchisor is the owner of all right, title, and interest in and to the Proprietary Marks. Franchisor agrees to indemnify and hold Franchisee harmless against any claim that Franchisee's authorized use of the Proprietary Marks infringes the rights of any third party, provided that Franchisee immediately notifies Franchisor of the claim and cooperates fully in Franchisor's defense or settlement.

b) Franchisee's Use. Franchisor grants Franchisee a limited, non-exclusive, revocable license to use, reproduce, publicly display, and distribute the Proprietary Marks solely as set forth in this Agreement. Any other use requires Franchisor's prior written permission and may require additional fees.

c) Franchisee shall use the Proprietary Marks in substantially the same manner as used by Franchisor as part of the System, specifically as follows:

________

Franchisee shall, if requested by Franchisor, identify itself as a licensee or franchisee in the manner specified.

d) Franchisee may not assign, transfer, sublicense, or permit any other person or business to use any of the Proprietary Marks, and may not hold itself out as an agent of Franchisor through such use.

e) Franchisee shall not use, display, apply to register, or register with any local, state, or federal authority any names or marks confusingly similar to any of the Proprietary Marks.

f) Franchisee shall comply with all of Franchisor's instructions regarding required filings for fictitious or business names and shall execute and maintain all necessary documentation to operate the New Franchisee Business and use the Proprietary Marks.

g) If any litigation regarding the Proprietary Marks is threatened or commenced against Franchisee, Franchisee shall immediately notify Franchisor in writing and cooperate fully in Franchisor's defense or settlement. Franchisee shall not institute any litigation or serve any notice without Franchisor's prior written consent. Franchisor has the right to bring such action and to join Franchisee.

h) Franchisee agrees that Franchisor and its affiliates own all right, title, and interest in the Proprietary Marks and the associated goodwill, and that such marks are valid.

i) Franchisor may, at its sole discretion, replace, add, delete, or modify the Proprietary Marks, and Franchisee shall accept the new Proprietary Marks and bear the reasonable cost of conforming the New Franchisee Business thereto.

j) Franchisee agrees not to attack the ownership, title, or rights of Franchisor or its affiliates in the Proprietary Marks, contest their validity, take any action that could jeopardize or infringe them, or misuse them in any way.

k) Franchisee acknowledges that it has no ownership interest in the Proprietary Marks, the System, or any other intellectual property of Franchisor or its affiliates, that any license granted is non-exclusive and effective only during the Term, and that such license is revocable in accordance with this Agreement.

l) Franchisee may not use any other marks in connection with the Proprietary Marks without Franchisor's prior written approval.

ARTICLE 15 — COVENANTS NOT TO COMPETE

15.1 During the Term and for a period of ________ following the expiration or termination of this Agreement, and within a geographic area consisting of ________, Franchisee shall not, directly or indirectly, own, operate, manage, engage in, or have any financial interest in any business that is competitive with the Business or the System, except as may be permitted under this Agreement.

15.2 Franchisee shall not:

a) Use any business information provided by Franchisor, directly or indirectly, to obtain a commercial advantage over Franchisor, or use any designs, ideas, or concepts created by or belonging to Franchisor, without Franchisor's prior written consent;

b) During the Term and for a period of ________ thereafter, solicit the clients or customers of Franchisor to provide or supply goods or services of the same or similar type to those provided during the Term; or

c) During the Term and for a period of ________ thereafter, solicit, entice away, employ, or offer to employ any person employed by Franchisor. This prohibition shall not apply to the recruitment of any such employee who responds to a bona fide general advertisement or is recruited by an agency, provided Franchisee gave no direct or indirect encouragement.

15.3 Franchisee shall not sell any products other than those provided by Franchisor through the System within the Territory during the Term.

15.4 The Parties acknowledge that the foregoing covenants are reasonable and necessary to protect Franchisor's legitimate business interests. If any covenant is held by a court of competent jurisdiction to be unreasonable or unenforceable as to duration, geographic scope, or activity restricted, the Parties agree that the court may reform such covenant to the maximum extent enforceable under applicable law.

ARTICLE 16 — CONFIDENTIALITY

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ARTICLE 17 — INSURANCE & INDEMNIFICATION

During the Term, Franchisee shall obtain and maintain insurance coverage with carriers acceptable to Franchisor in accordance with Franchisor's insurance requirements. Coverage shall begin no later than the date Franchisee executes a lease for the New Franchisee Business. The coverage requirements are as follows:

________

Franchisee shall name Franchisor and its affiliates as additional insureds and shall provide certificates of insurance upon request. Franchisee agrees to indemnify, defend, and hold harmless Franchisor and its affiliates, agents, employees, and representatives against any and all damages, liabilities, losses, claims, legal fees, and costs, however caused, arising out of the use, condition, construction, equipment, decoration, maintenance, or operation of the New Franchisee Business, except to the extent caused by Franchisor's gross negligence or willful misconduct.

ARTICLE 18 — RELATIONSHIP OF THE PARTIES

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ARTICLE 19 — GENERAL PROVISIONS

a) Governing Law, Jurisdiction & Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of ________, without regard to its conflict-of-law principles, except to the extent governed by the Federal Trade Commission Franchise Rule and any applicable state franchise statutes. The Parties submit to the personal jurisdiction of the state and federal courts located in ________, State of ________, for any litigation permitted under this Agreement. Franchisee waives any objection to venue, including the doctrine of forum non conveniens, to the extent permitted by applicable law.

b) Arbitration. Except as otherwise provided herein, any dispute relating to or arising out of this Agreement shall first be subject to good-faith negotiation. If unresolved, the dispute shall be submitted to binding arbitration administered in accordance with the rules of the American Arbitration Association, conducted in ________, before a single arbitrator. The arbitrator shall have no authority to add parties, vary the provisions of this Agreement, award punitive damages, or certify a class, and shall be bound by applicable federal law and the laws of the State of ________. This Agreement evidences a transaction involving interstate commerce and the Federal Arbitration Act shall govern the interpretation and enforcement of this arbitration provision. Intellectual property claims and claims for injunctive relief by Franchisor are excepted from arbitration and may be litigated. The Parties waive any right to a jury trial as to arbitrable claims. Nothing in this provision shall require arbitration of any claim where such requirement would be unenforceable under applicable state franchise law.

c) Language. All communications and notices under this Agreement shall be in the English language.

d) Assignment. Franchisor may assign or transfer any of its rights or delegate any of its obligations under this Agreement, in whole or in part. Franchisee may not assign, sell, lease, or otherwise transfer this Agreement or any rights granted hereunder, in whole or in part, without Franchisor's prior written consent, which shall not be unreasonably withheld if the proposed transferee meets Franchisor's then-existing requirements for franchisees. Any approved assignment shall be effected through a separate executed agreement. Any attempted assignment without consent shall be void and may, at Franchisor's discretion, result in termination.

e) Amendments. This Agreement may only be amended in a writing signed by both Parties.

f) No Waiver. No term of this Agreement shall be deemed waived by any act or acquiescence of Franchisor; only a written agreement may effect a waiver. No waiver shall constitute a waiver of any other term or of the same term on a future occasion. Failure to enforce any term shall not constitute a waiver.

g) Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable, the remaining provisions shall continue in full force and effect, and the invalid provision shall be deemed modified to the minimum extent necessary to render it enforceable or, if not possible, severed without affecting the remaining provisions.

h) Survival. Those provisions which by their nature are intended to survive expiration or termination, including those relating to confidentiality, non-competition, indemnification, intellectual property, and dispute resolution, shall continue in full force and effect notwithstanding expiration or termination.

i) Entire Agreement. This Agreement, together with the FDD and any exhibits or attachments, constitutes the entire agreement between the Parties and supersedes all prior or contemporaneous understandings, whether written or oral. Nothing in this provision is intended to disclaim reliance on any representation made in the FDD as required by applicable law.

j) Headings. Headings are for convenience only and shall not affect the construction of this Agreement.

k) Counterparts. This Agreement may be executed in counterparts, including by electronic signature, each of which shall be deemed an original and all of which together constitute one agreement. If the dates set forth at the end differ, this Agreement shall be effective as of the later date of signing.

l) Force Majeure. Neither Party shall be liable for any failure to perform due to causes beyond its reasonable control, including acts of God, acts of civil or military authority, riots, embargoes, natural disasters, epidemics, pandemics, and other unforeseen circumstances.

m) Notices. Any notice under this Agreement shall be in writing and sent by first-class mail, overnight courier, or email to the relevant address set out at the head of this Agreement or to the email address set out below, or to such other address as a Party may notify in accordance with this clause. Notices shall be deemed received three (3) business days after mailing (first-class mail), one (1) business day after dispatch (overnight courier), or the next business day after sending (email, provided dispatch is confirmed). The contact information for the Parties is as follows:

Franchisor:

________

Franchisee:

________

EXECUTION

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the dates set forth below.

FRANCHISOR

Name of Entity: ________

Representative Name: ________

Representative Title: ________

Representative Signature: ____________________________

Date: ________

FRANCHISEE

Name of Entity: ________

Representative Name: ________

Representative Title: ________

Representative Signature: ____________________________

Date: ________