How should you look for the right franchise system?
You can use the contract assessment to examine and question the agreements drawn up by the franchise companies before you sign them and commit yourself to setting up a business via franchising. The best advice here is to carry out this step very carefully. For: the only things that will provide security is what you have in black and white.
- Does the franchisor insist on the business being carried out as a one-man business or can the legal form, incorporated firm, also be chosen?
- Is the business carried out in your own name and on your own account?
- Does the franchisee have sole responsibility for his personnel?
Checking the Contract
- Has the franchisor’s draft contract been checked by the national franchise association?
- Can the franchisor verify that there are no reasons which might stand in the way of the system receiving public grants?
- Have all additional agreements been added to the draft contract?
- How much time is allowed for an expert advisor to check the contract?
- For what period of time is the franchise contract to be concluded?
- Does the planned contractual period allow for an amortization of the intial investment?
- Is the contract automatically extended or is there a clear extension option?
Violations / Sanctions
- What sanctions are taken if the obligation to maintain secrecy is violated?
- Do the franchisor’s revocation instructions correspond with legal conditions?
- Is it forbidden to contract away customers within the system and if so how is such a violation punished?
- In the case of disagreements between the contractual parties is a court of arbitration used?
Termination of a Contract
- Does the franchisor wish there to be a clause prohibiting competition after the contract has been terminated?
- What compensation is offered for such a prohibition to compete after the termination of the contract?
- Are the reasons for a termination without notice by the franchisor listed in detail?
- What are the total costs which a franchisee must bear if he terminates the contract prematurely?
- Is it possible to terminate the contract in the case of a serious illness or death?
- What conditions are linked to transferring a franchise business to a third party?
- What tasks and duties must each side carry out when the contract is terminated?
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