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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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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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