Five critical questions to ask when reviewing a franchising agreement

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-Written by Erik Sargent

If you’ve made the decision to invest in a franchised business, it’s important to completely understand what exactly you’re getting into before signing on the dotted line.

The proper research, along with extensive planning, is necessary before you officially purchase into a franchising brand, and understanding the franchise agreement you sign is an important step in the journey to profitability and success. These franchise agreements set the tone for the entire business relationship between you and the franchisor, so it’s critical you do your due-diligence to stay up-to-date on everything involved with your purchase.

Here are five questions to ask when reviewing your franchise agreement!

  1. Do I have the exclusive rights to the location I am purchasing? There a variety of ways a company can divide franchise territories, and territories aren’t always exclusive. Make sure you know what you’re getting with your investment.
  2. Is the franchise agreement negotiable? If you research and find out the agreement is negotiable, this should raise some concerns. It’s important to find a franchise agreement that is uniform because this ensures you and fellow franchisees are operating under the same terms. This also ensures the brand you are investing with retains its quality and value.
  3. Is the agreement one-sided? It is pretty typical for franchise agreements to contain provisions which, on their face, seem unilaterally favorable to the franchisor, such as the ability of the franchisor to make enforceable changes to policies at any time or broad termination clauses.  By investing in a franchise, the most valuable asset you are getting is the brand. You do not want all of your hard work into your franchise to be undermined by the actions or inactions of a fellow franchisee. Franchise agreements must be strong to protect that investment.
  4. How long does the agreement last, and what are the terms of renewal? Generally, there is no specific time-range required with a franchise term, but they usually go anywhere from five to 20 years. Make sure to verify with the brand that the agreement is long enough for you to recover your initial investment.
  5. What fees will I be charged? In franchising, common fees include the initial purchasing fee, a renew feel, a transfer fee, royalties, advertising fees, technology fees, and training fees. In certain cases, franchise may be required to use certain vendors at their own expense. Make sure to review all of these fees when making financial projections.

Contracts play a huge role in the process of becoming a franchisee, but it’s important to remember that successful franchise systems are built on strong relationships. Finding a proven franchising network with happy franchisees will make the process easier, and usually pays off better in the long run.

At TWO MEN AND A TRUCK, we work our hardest to provide all of this and more for our franchisees, and the opportunity we provide and the success that is available speaks for itself.

“TWO MEN AND A TRUCK offers great support and has recommended processes and procedures for almost everything one does in the business,” said multi-unit TWO MEN AND A TRUCK franchisee James Bennet. “It is great to be a part of a growing, agile, forward-looking company. I am proud to be a TWO MEN AND A TRUCK franchisee.”

For information on starting your own TWO MEN AND A TRUCK® franchise location and to access performance information which is available to prospective owners click here.

TWO MEN AND A TRUCK® is the first and largest franchised moving company in the United States. Let us help move you forward! For more helpful tips and information on moving services subscribe to our blog and like us on Facebook.

2 thoughts on “Five critical questions to ask when reviewing a franchising agreement

  1. Pingback: Our top Franchising You blog posts from the past year! | Franchising You.

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