Lesson 4

THE FRANCHISEE -
FRANCHISOR
RELATIONSHIP
 THE FRANCHISE AGREEMENT
 essentially a legal document between the franchisor and you (the
franchisee). It is a legal binding agreement. It explains in detail
what the franchisor expects from you, as a franchisee, in the way
you operate every facet of the business. There is no standard form
of franchise agreement because the terms, conditions, and the
methods of operations of various franchises vary widely depending
on the type of business. Every franchisee is required to sign the
franchise agreement, and the franchisor will also sign the
document. A word of caution, a franchise agreement is a binding
legal document and you may want to have a franchise attorney
review it on your behalf prior to signing.
Contents of a Franchise Agreement

Renewal
Investment amount and fees
Franchise fee
Royalties
Marketing contribution
Training and Support
Purchase of products
Territory
Termination
 Benefits of Franchise Relationship
 The franchise organization needs to promote a healthy two-
way way relationship between franchisor and franchisee
 A franchise business can be conceived as beneficial to
franchisor and franchisee
 Keeping the relationship of the franchisor-franchisee
harmonious usually seems to fall on the franchisor
 a franchise often reaches the break-even point faster than an
independent business would
THE FOUR PHASES OF FRANCHISEE-FRANCHISOR
RELATIONSHIP

RECRUITMENT
GROWTH
MATURITY
THE END OR A NEW BEGINNING
TYPES OF FRANCHISE RELATIONSHIP
STRUCTURE

Single-Unit Franchises
Multi-Unit or Area Developers
Master Franchising
 ECONOMIC AND FINANCIAL RELATIONSHIPS OF
FRANCHISORS AND FRANCHISEES

The Franchisor as a Supplier of Intangibles and Services

The Franchisor as a Supplier of Tangible Products

The Franchisor as a Source of Capital

The Franchisor as Landlord