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Franchise Agreement Questionnaire

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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? __________________________________________

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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? __________________________________________________

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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? ____________

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Is advertising national, regional, or local? _______________________________

What other services does the franchisor provide? _______________________________

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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 ______________________________________________________

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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? _____________________________________________________________________

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Who provides property insurance on the premises? Franchisor ___ Franchisee ___

What are the franchisee's responsibilities relating to remodeling? __________________

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What restrictions does the franchisor place on remodeling? ________________________

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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? _________

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What aspects of the business are left to the discretion of the franchisee? _____________

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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? _________________

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What are the franchisor's duties and obligations to the franchisee in the event of such termination? ________________________________________________________________________

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Under what conditions must the franchise be renewed? ___________________________

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What happens to the franchisee's interest if he or she dies? ________________________

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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: __________________________________________

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Speak with a Business and Commercial Law Attorney

If you are considering going the franchise route, be sure you have all the information necessary to make the best possible decisions. Numerous business throughout the U.S. use franchises as their way into the marketplace such as the automotive or fast food industry. If you have questions about the law, a good first step is consulting a business and commercial law attorney familiar with the laws of your jurisdiction.

Additional Resources

Next Steps
Contact a qualified business attorney to help you
navigate the process of starting a business.
(e.g., Chicago, IL or 60611)

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