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Franchise Agreement Questionnaire
Also available in PDF | MS Word
One popular way to get started in your own business is through a franchise. A franchise is a business organization in which a well-known firm with a successful product or service--the franchisor--enters into a contractual relationship with another business--the franchisee--that operates under the franchisor's name in exchange for a fee. Fast food restaurants are commonly operated as franchises. Before you enter into a franchise agreement, consider the following questions, and go over your responses with your attorney.
COST OF THE FRANCHISE How much is the initial franchise fee? $_____________ Refundable ___ Nonrefundable _____ What does the initial fee purchase? __________________________________________ _____________________________________________________________ ________________________________________________________________ Is a lump-sum payment required? Yes ___ No ___ Are installment payments allowed? Yes ___ No ___ How many? ___________ Payment due dates __________________________________________________ Is franchisor financing available? Yes ___ No ___ Interest rate _____________ Are periodic royalty payments required? Yes ___ No ___ How often? ________________________________________________________ How are they calculated? __________________________________________________ _____________________________________________________________ ________________________________________________________________ Does the franchisor provide accounting services? Yes ___ No ___ For an additional fee? Yes ___ No ___ How much? $_________ How are advertising costs divided between the franchisor and franchisee? ____________ _____________________________________________________________ ________________________________________________________________ Is advertising national, regional, or local? _______________________________ What other services does the franchisor provide? _______________________________ _____________________________________________________________ ________________________________________________________________ How is the franchise premises obtained? Purchase ___ Lease ___ Is financing available from the franchisor for the purchase of the premises? Yes ___ No ___ Interest rate _________ How much of a down payment is required? $_____________ How much are the rent payments? $_____________ Due on _______________ FRANCHISE LOCATION What geographic area is encompassed by the franchise? __________________________ How far away is the nearest existing franchisee of the same franchisor? _____________ Are other franchises planned for the same geographic area in the future? Yes ___ No ___ If so, provide details ______________________________________________________ ________________________________________________________________________ Who selects the site for the franchise? Franchisor ___ Franchisee ___ Can the franchisee use his or her own property for the franchise? Yes ___ No ___ If the franchise premises require new construction, who determines the plans and specifications for the building? Franchisor ___ Franchisee ___ Who supervises construction and works with the contractor and subcontractors? Franchisor ___ Franchisee ___ What are the specifications for and restrictions on the appearance and configuration of the premises? _____________________________________________________________________ _____________________________________________________________ ________________________________________________________________ _____________________________________________________________ ________________________________________________________________ Who provides property insurance on the premises? Franchisor ___ Franchisee ___ What are the franchisee's responsibilities relating to remodeling? __________________ _____________________________________________________________ ________________________________________________________________ _____________________________________________________________ ________________________________________________________________ What restrictions does the franchisor place on remodeling? ________________________ _____________________________________________________________ ________________________________________________________________ OPERATING TERMS
Must all equipment and supplies be purchased from the franchisor? Yes ___ No ___ If not, must purchases be approved by the franchisor? Yes ___ No ___ How much control does the franchisor maintain over day-to-day operations? _________ _____________________________________________________________ ________________________________________________________________ _____________________________________________________________ ________________________________________________________________ What aspects of the business are left to the discretion of the franchisee? _____________ _____________________________________________________________ ________________________________________________________________ _____________________________________________________________ ________________________________________________________________ Are hours and days of operation dictated by the franchisor? Yes ___ No ___ Are products and services strictly controlled by the franchisor? Yes ___ No ___ Must the franchisee remain personally involved in running the franchise, or can the management duties be delegated? ____________________________________________ ADDITIONAL CONSIDERATIONS Does the franchisor provide initial training? Yes ___ No ___ Does the franchisor provide on-going training? Yes ___ No ___ Under what conditions may the franchisor terminate the franchise? _________________ _____________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ What are the franchisor's duties and obligations to the franchisee in the event of such termination? ________________________________________________________________________ _____________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ Under what conditions must the franchise be renewed? ___________________________ _____________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ What happens to the franchisee's interest if he or she dies? ________________________ _____________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ Is the franchise assignable? Yes ___ No ___ How long has the franchisor been in business? ___ years How many total franchises are there? ________ Are these franchises financially successful? Yes ___ No ___ How long did it take them to become profitable? _______________ Has the franchisor complied with all applicable state and federal laws and regulations? Yes ___ No ___ Other questions to ask my attorney: __________________________________________ _____________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ |
FAQs
- I have an idea for a business. What is the first thing I should do?
- What legal problems does a business typically encounter after it is organized and operational?
- How does a franchise work?
- What are operating expenses?
- How do I go about financing my business?
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