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The Relationship between a Franchisor and Franchisee (Part A)
The relationship between a franchisor and franchisee is a complicated network of paperwork and legal language. The most appropriate title of this type of relationship is a legal relationship; one in which two independent contractors cannot be bound by one another except as is specified by written agreement.
Written Agreements Between Franchisor and Franchisee
The franchisor-franchisee relationship is governed monogamously by written agreement. If you are considering purchasing a franchise, you must be familiar with all forms of these documents. Such documents will be of the utmost importance in the future of your business.
Depending on the type of business you choose to be involved in, as a franchisor or franchisee you will likely come into contact with several of the following documents:
- Franchise or license agreement; the original contract establishing the relationship between and the regulations and rights of the franchisor and franchisee.
- Sub-franchise or sub-license agreement; this is the same as the first agreement, but applied to sub-franchisors.
- Three-party agreement; the document establishing the terms of the relationship between a franchisor and sub-franchisor or a master franchisee and franchisee.
- Franchise commitment agreement; this is used to commit all parties to the franchise agreement at such a time said agreement is approved.
- Franchise site selection agreement; the contract granting site selection authority to a specified party when a site has not yet been selected at the time the franchise agreement is signed.
This list is hardly exhaustive. In fact, it barely begins to cover the many agreements that could pass between a franchisor and franchisee over the course of the relationship. There are still leases, facility development agreements, promissory notes, assignment agreements, guaranties and many more waiting for your signature.
Every document is highly important and must be given your full attention before it is signed. The input and scrutiny offered by your New York business attorney is priceless at this stage. Perhaps the most important contract is the original franchise agreement, as it sets the stage for all future agreements.
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