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7
8.3 - Le Séduire: Restaurant Business Plan
December 05, 2021

Introduction
This is a business plan of a restaurant business, and the plan
will address various components of the business and
specifically some of the legal requirements for starting up and
running the business such as proprietary rights, legal setting of
the business and other factors, location requirements among
other elements. The restaurant business is a high-end business
that sales very exotic meals so as to attract customers from
different parts of the world. The business plan’s focus is the
legal requirements needed to help kick start the business and as
a CEO of the business I am responsible for the preparation of
the plan and ensuring that the requirements are met.
The restaurant is offers high end type of services which
means that quality is a key factor in the provision of services in
the restaurant. The services that are offered in the business
include meals, drinks, accommodation, conferencing, halls
among other services. The location of the business is in Florida
where there are various legislations that govern the operations
of restaurants. Additionally, in Florida there are other various
restaurants which means that the competition will be stiff for
the business.
Legal form of the business
The appropriate form of business that will be used i n the startup
is a partnership where I and Sally will co-own the business. A
partnership is the form of business where the Le Séduire will be
owned and managed by Sally and I which means that we will
both have the obligation to share in the profits and losses of the
entity (Gaille, 2018). This business form will be started without
any other external parties and the main reason why it is the
appropriate business form is because we intend to maintain
control over the business activities in the organization.
The costs which will be incurred in the start of the

business operations include the costs of purchasing needed
assets and equipment and acquiring the premises where the
business will operate. The business is ideal because of the
various tax benefits that will be associated with the partnership
business. The general partnership is advantageous because the
business will not be liable for income tax, but the profits will be
shared among the partners, and we will include them when we
are filling tax returns.
The business form is ideal as it will help share the costs of
starting and running the business between us which means that
we will not have to carry the financial burden of paying the
expenses of the business. There are various disadvantages
associated with the business and one of them is that the personal
assets we own personally will not be protected which means that
they can be used in settling debts in case of defaults. Also, the
business is not treated as a separate legal entity and that is why
the personal belongings can be used in settling of the debts.
There are other officers that will be needed in running the
business and one of them is a marketing manager who will be
required to help in marketing the business and helping increase
the sales of the business. A logistics officer is needed to help
control the supply chain in the organization and a human
resource manager is needed to manage the issues related to the
employees such as hiring process, training programs and even
the remunerations for the employees. The process of registering
the business will involve various steps and the first step is the
selection of a partnership name and the filling of a trade name.
The filling costs involved in registering the business in
Florida will entail the payment of a $60 dollar fee. After filling
for the trade name the next step will be drafting and signing up
a partnership agreement. The business will also be needed to
obtain the necessary licenses, permits, and Zoning clearance
before the startup of the business activities.
Legal setting of the business

There is various state, local and state requirements for the start
of the business. One of the requirements for the application of
the zoning clearance is that the business will need to be located
in an area which is far from any religious center or academic
center. The business intends to have various employees to help
us with the business operations and as the owners it is our
responsibility to ensure that the employees are safe when
working in the organization. The employees will be safe when
there is needed security protocols such as fire extinguishers and
alarms. We will need to ensure that the working environment
for the business is safe and there are no harmful components
that might threaten the health and the life of the employees.
Location requirements
The specific location of the business was selected because of
various strategic reasons that make it the ideal place for the
location of the restaurant business. The location has various
busy stores in the vicinity and is near very busy streets with a
lot of traffic that will help generate sales for the business. The
target market for the business is local and international tourists
that are willing to try different foods from different regions.
The business location will help ensure that more people access
it to purchase the delicious foods.
Another factor that was considered in selecting the
location of the business was the level of competition in the area.
The hotel will be a high-end hotel and there are very minimal
number of similar businesses in the region which means that
customers will not have so many alternatives to select from.
One thing that will help the business stand out is the focus of
French cuisine that is not available in other restaurants nearby
that mainly focus on selling fast food and American cuisines.
The business location will help set out the tone of the business
and since the business is located nearby traffic and busy streets
it will be easy to promote the business to the people who will be
passing by and this is by offering discounts, free drinks and

giving out flyers to the people which will entail various details
about the business including the products and services which
are sold in the business.
Business License Research and Costs
There are various local, state, and federal licenses which will be
needed in running the business. The first business license that
will be Florida sales tax permit and the permit will be offered to
the business for free. The permit is necessary as it is the license
that will grant the business permission to sell the various
products and services to the customers. The Food Service
license costs $50 and is a requirement for all organizations and
businesses that handle food in Florida. The license will also
require a liquor license that will cost the business around
$10,850 and $300,000 which will be needed to allow the
business to sell alcoholic beverages.
The restaurant needs to also apply for an employee health
permit that will help certify that the employees have undergone
the necessary safety training that is needed for individuals that
handle food which is sold to people. The Live Entertainment
and Music License costs around $300 to $600 that is required
since the restaurant will be playing music for the guests who
come to enjoy food sold by the business. The business will need
to have locations signs that will make it easier for the first-time
customers to locate the business and thus the business will need
a sign permit that will cost the business $75.
Insurance Requirements
The business will do everything possible to help ensure that the
property and the employees are well covered and avoid any
unexpected expenses due to lack of insurance policy. The
general liability insurance will cover the business and the
owners for any bodily injuries or destruction of property that
will result from the core business activities of the restaurant. A
product liability insurance will help the organization in case any

harm befalls the customers from consumption of products and
services which are sold in the organization.
Inventory insurance will also be purchased to help the business
offset any losses which result from the stocks of the business
such as foodstuffs getting spoiled because of circumstances that
are beyond the control of the restaurant (McKeever, 2018). A
commercial auto insurance will be required to cover all the
vehicles that will be utilized in the business activities of the
organization. A surety bond will be needed to cover the
business in case any of the partners for one reason or the other
is unable to complete a part of their obligations.
Proprietary requirements
The business will have a payment system that can be
categorized as an intellectual property. The payment system has
been developed by the organization and is made up of patented
mobile application that the customers can download from their
smartphones and other devices that will help them book a table
on their phones (Borders-Hemphill et al., 2018). The application
will also be very helpful in scheduling the pickups and orders
which are made by the customers to ensure convenience. The
logo and the name of the restaurant will be protected under the
trademark law and this is to ensure that other similar
organizations do not imitate or copy them.
Employment Law and Requirements
From the research there are various legal requirements and laws
which the business will need to adhere to in regard to
employment of staff. The first legal requirement is that the
restaurant will be required by law to abide to the OSHA safety
standards which requires the organization to ensure that it offers
a safe working environment for employees through provision of
protective equipment needed, safety measures such as
installation of emergency exist, and fire extinguishers are
adhered to.
The business will also be required to be an equal opportunity

employer which means that the minority groups will be well
represented, and no age, gender, race or ethnicity is given
special treatment during the hiring process. The Fair Labor
standards act will also regulate the business and requires that
there is a minimum wage for the employees in the country and
state (Carnevale et al., 2019). The restaurant needs to comply
with the necessary minimum wage requirements and ensure that
the employees are compensated accordingly for any amount of
overtime worked. The business will be needed to report various
types of taxes such as Federal employment tax, social security
tax and Medicare tax.
The best option for the organization is employees although
independent contractors are better when it comes to the
liability; independent contractors are liable for their own
actions while an organization is liable for some of the
employees’ actions especially those done within the context of
their duties and responsibilities. Independent contractors are
useful in the case of a short-term engagement and the restaurant
is to be established as a going concern which means that the
organization will need to have employees. Employees are a
better option since once they are well trained and have worked
for the organization for a long period of time they will be able
to guarantee quality. The organization can have independent
contractors when it has projects that will run for a short period.
Purchase Orders and Contracts
The business will need to have regular supplies of foodstuffs
such as vegetables, seafood, and spices and the restaurant will
have a contract with suppliers to have them deliver the various
supplies to the business at regular basis. The restaurant is a
high-end restaurant which means that there are some exotic food
stuffs that are required by the organization. These foodstuffs
will have to be imported under special delivery which means
that they will not be supplied regularly and this to ensure that
items are imported in bulk to minimize the shipping costs.
Some of the drinks will be sourced from the local suppliers
but most of the wine will be imported from the French wineries

to ensure that our clients enjoy exotic and high-quality wines so
that the business stands out from other competitors in the
industry. The restaurant will need maintenance and for these
contracts with local maintenance companies will be required
where the companies will be in charge of keeping all the
systems within the restaurant running and also ensuring that the
systems that fail are repaired and restored by the organization.
A contract with a landscaping entity will also be needed to help
ensure that the gardens are very green and the area outside the
restaurant is very attractive to help appeal to the customers and
the potential customers that walk by the business.
Torts and crimes protection
There are various torts and crimes which our restaurant business
will be exposed to that could result into legal consequences in
the organization. The restaurant will need to protect itself
against three specific types of torts that are strict liability,
intentional tort and negligence. Strict liability refers to the
liability the business will incur from activities that are not their
fault. For instance since the business is selling alcoholic
beverages it could find itself in situations where they sell the
alcoholic beverages to minors while thinking that they are old
enough to be consuming alcohol and this would affect the
business very negatively.
Intentional torts refer to any acts that will be conducted by
the business or its employees with the intentions of causing
harm or inflicting pain. Examples of the intentional torts
include batteries and assaults such as situations where an
employee beats up or is bitten up by a customer that is an
intentional tort. Another tort which the restaurant will need to
protect itself from is negligence which is a result of lack of
taking appropriate care in the conduct of one’s duties and
responsibilities (Epstein & Sharkey, 2020). The employees in
the organization shall be given the appropriate training to help
ensure that the procedures and policies of the organization are
followed. The installation of security cameras is aimed to help
prevent crime in the restaurant by having the employees under

surveillance 24 hours in a day.
Property and Requirements
We intend that the business becomes a luxurious and high-end
restaurant and for that reason there will be a need to invest so
much in equipment and property design. We will invest in a
garden Terrance which will be ideal for attracting and appealing
to the customers. We will also invest in marble tiles for the
flooring and ensure that the restaurant has excellent, beautiful
finishes and enough storage units. The roofing of the restaurant
will be done using latest and unique designs through contractors
who will help design the restaurant and all the components of
the restaurant.
The fittings and the décor for the restaurant also needs to be
very exquisite to match the standards for a high-end restaurant.
Furniture is another element which the business will focus so
much on and this is to make the restaurant more appealing to
the people and ensure that the customers are comfortable and
the business is able to host functions and events. The initial
costs which are needed for the installation the various
equipment will be around $300,000.
UCC Considerations
There are various UCC considerations that will be made in
the organization. UCC covers the general sale of merchandise
and also regulates the food industry as well. We will ensure that
the business is compliant and offers food that is safe to the
customers. We will ensured that appropriate measures are
implemented to help ensure that the customers and the guests
from the organization are well protected from any food
poisoning through contaminated food. The employees shall be
trained on the necessary FDA requirements to help ensure that
they are certified to handle food which is sold to the public.
Other considerations
There are many other considerations that will be made when
starting up, running, and closing the business. One

consideration is the contribution of the different partners
towards the capital of the business. A partner will earn profits
and share in the losses based on the capital contribution that we
make at the beginning of the business. Another factor that needs
to be considered is the environmental regulations and legal
requirements.
As a business we will be committed towards ensuring that we
have proper waste management and disposal system so that the
waste does not contaminate water or land. We also aim to
become a sustainable brand that is concerned about the
wellbeing of the people and hence will ensure that our
operations are environmentally friendly through recycling of
plastics and using biodegradable packaging for the products
which are sold by the business.
Conclusion
Our business is a high-end restaurant business that will focus
more on quality and offering exotic services to the customers.
The business will stand out because of its unique menu where
we will offer very delicious and healthy foodstuffs to the
customers. For the business, a partnership form of ownership
will be utilized where Sally and I will share in the profits and
losses of the organization and work together in the management
of the business. The location is also a driver of success as we
have selected a spot that is in a business setting with a wide
population so that we have access to a wide market. We intend
to comply with the applicable local, state, and federal legal
requirements to avoid legal consequences.
References
Borders-Hemphill, V., Chan, I. Z., Brown, K., Rider, B., Taylor,
K., & Chai, G. (2018). Use of
Proprietary Names by Prescribers for Generic
Products. Therapeutic innovation & regulatory science, 52(2),
256-260.
Carnevale, A. P., Jennings, L. A., & Eisenmann, J. M. (2019).

Contingent workers and
employment law. In Contingent Work (pp. 281-305). Cornell
University Press.
Epstein, R. A., & Sharkey, C. M. (2020). Cases and materials on
torts. Aspen Publishers.
Gaille, B. (2018, August 24). 21 General Partnership
Advantages and Disadvantages. Brandon
Gaille
McKeever, M. P. (2018). How to write a business plan. Nolo.
Partial FDD Information:
Franchise Description: American Brain Freeze Dessert
Corporation (ABFD), the
Franchisor, offers a single unit and multiple unit franchises for
the operation of Brain
Freeze Dessert restaurants at authorized locations. An ABFD
restaurant is a quick-
service food takeout restaurant with seating from which
franchisees will sell the full line
of approved Dessert and beverage menu items.
Training Overview: There are currently four required
components to initial Training:
1. The Management Operation Protocols Training (MOPT)

2. 3STAR SERVSAFE – certification
3. ABFD’s training program (three phases): Phase 1, Product
and Equipment
Training; Phase 2, Systems & Management Training; Phase 3,
People, 3STAR,
and “MO-MONEY” bottom-line Training.
4. A “Dessert Prep&dec” and certification course
The franchise’s designated manager and two assistant managers
are required
attendees for the first three components. Only the Chef is
required to attend the
Dessert Prep&dec certification course. Before attending the
Franchisor’s training
program, the required attendees must pass the MOPT, which
administered at a location
designated by the Franchisor. The MOPT measures leadership,
customer service,
decision-making, prioritizing, and business math, which may be
modified by the
Franchisor at any time. The required attendees must also have
current 3STAR
certification, which will only be recognized by the Franchisor if
received through a

course that is part of or equivalent to the National Restaurant
Association’s 3STAR-
SERVSAFE program. Before the opening of the restaurant, at
least one of the
restaurant employees must become a “Dessert Prep&dec” by
attending and
completing a Dessert preparation certification course. The
franchise’s controlling owner
(as defined in the franchise agreement) must, at the
Franchisee’s expense, attend all
meetings the Franchisor holds or sponsors in their area or
region including all DMA or
other marketing area meetings, and all meetings relating to new
products or product
preparation procedures, new ABFD system programs, new
operational procedures or
programs, Training, restaurant management, financial
management, sales or sales
promotion, or similar topics.
Territory Granted: Where a franchisee enters into a franchise
agreement and
Franchisor has granted and consented in writing, the Franchisee

is permitted to operate
a Store at that authorized location. Under the Agreement, there
is no grant to
Franchisees of any minimum area of territory. The Franchisor
does not grant exclusive
territories to any franchisee under the terms of a franchise
agreement.
Obligations and Restrictions: Franchisees are required to
operate their ABFD
location under their active and continuo us supervision. If the
Franchisee is a business
entity, the Franchisee is required to have one owner who is
responsible for overseeing
the general management of the day-to-day operations of the
location. The Franchisor
requires franchisees to offer and sell only those goods and
services that it has
approved. Also, franchisees may offer and sell these approved
goods and services only
from their restaurant. Franchisees must carry the required menu
items that the
Franchisor designates for their business.
Term of Agreement and Renewal: The length of the initial
franchise term is ten years.

Renewal is for one additional Term for the shorter of 10 years
or the remaining Term of
the lease, where Franchisee meets all requirements.
Financial Assistance: The Franchisor and its affiliates do not
offer financing
arrangements or similar assistance to franchisees. The
Franchisor periodically arranges
with third-party finance companies or banks to make financing
programs available to
franchisees. These arrangements ordinarily involve no more
than arranging to put
franchisees in contact with sources of financing available. There
is no assurance that
financing will be available in any particular instance. The
Franchisor nor any of its
affiliates receive any payments in exchange for referrals or the
placement of any
funding.

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FRANCHISE AGREEMENT
This Franchise Agreement ("Agreement") is made and effective
this [DATE],
BETWEEN: [YOUR COMPANY NAME] (the "Franchisor"),
a company organized and existing under the laws of the
[State/Province] of [STATE/PROVINCE], with its head office
located at:
[YOUR COMPLETE ADDRESS]
AND: [FRANCHISEE NAME] (the "Franchisee"), an
individual with his main address located at OR a company
organized and existing under the laws of the [State/Province] of
[STATE/PROVINCE], with its head office located at:
[COMPLETE ADDRESS]

WHEREAS, Franchisor and certain of its Affiliates own,
operate and franchise [DESCRIPTION] throughout
[COUNTRY] which, among other things, rent, sell and market
[PRODUCT/SERVICE] to the [GENERAL PUBLIC OR
COPORATIONS OR GOVERNMENT]; and
WHEREAS, Franchisor and certain of its Affiliates acquire,
produce, license market and sell [PRODUCT/SERVICE]; and
WHEREAS, Franchisee is willing to purchase on a per Location
(the terms initially capitalized in this Agreement and not
otherwise defined herein shall have the respective meanings set
forth in Paragraph 18 of this Agreement) basis a specified
number of [PRODUCT/SERVICE]; and
WHEREAS, Franchisor is willing to provide various marketing,
advertising and promotional services and activities in support of
Franchisee;
NOW, THEREFORE, based on the above premises and in
consideration of the covenants and agreements contained herein,
and intending to be legally bound, the parties agree hereto as
follows:
1. AGREEMENT TERM
The term of this Agreement shall be for the period (the "Term"),
commencing as of the date of this Agreement. Each year of the
Term, as measured from the date of this Agreement, is a
"Contract Year."
2. TERRITORY
The territory for purposes of this Agreement with respect to

[PRODUCT/SERVICE] shall be [COUNTRY], their territories
and possessions (the "Territory"), except with respect to those
[PRODUCT/SERVICE] for which Franchisee has only
[COUNTRY] Distribution Rights, in which case, the Territory
with respect to such [PRODUCT/SERVICE] shall be limited to
[COUNTRY] and, if and to the extent Franchisor owns or
controls such rights, to territories and possessions of
[COUNTRY]).
3. REVENUE SHARING
Franchisee shall remit to Franchisor [%] of the net profits of its
business in the form of [ROYALTIES, ETC]. [DESCRIBE IN
DETAILS REVENUE SHARING BETWEEN FRANCHISOR
AND FRANCHISEE].
Distribution of profits shall be made on the [DAY] of
[MONTHS].
4. FRANCHISOR COMMITMENTS
Beginning as of the date of this Agreement for [NUMBER OF
LOCATIONS] located in [COUNTRY] within [NUMBER]
calendar months hereafter, and for Participating Franchises
within [NUMBER] calendar months hereafter, Franchisee agrees
as follows:
4.1 Purchasing
The following purchasing requirements shall apply to all
Locations and Participating Franchises
A. [FRANCHISEE REQUIREMENT]
B. [FRANCHISEE REQUIREMENT]

C. [FRANCHISEE REQUIREMENT]
4.2 Missing Products
For each [PRODUCT TYPE] that is lost, stolen or otherwise not
reasonably accounted for, for more than [SPECIFY] calendar
days during the period commencing upon delivery to
Franchisor's distribution center and ending on the last day of the
relevant Revenue Sharing Period, Franchisee shall pay
[AMOUNT] to Franchisor. For any such [PRODUCT TYPE]
Franchisee will reimburse Franchisor the applicable distribution
wholesale price less the applicable average Purchase Price
received by Franchisee.
4.3 Payment
The parties acknowledge and agree that if Franchisee fails to
order [NUMBER OF UNITS] required under Paragraph 3.1,
Franchisee shall pay [AMOUNT] to Franchisor, as liquidated
damages, an amount equal to [AMOUNT] for each unit which
Franchisee failed to order. If Franchisor fails to deliver the
number or units ordered by Franchisee under Paragraph 3.1,
Franchisor shall pay to Franchisee, as liquidated damages, an
amount equal to [AMOUNT] for each unit which Franchisor
failed to deliver. The parties hereto expressly agree and
acknowledge that actual damages for purposes of this
Subparagraph would be difficult to ascertain and that the
amount set forth above represents the parties' reasonable
estimate of such damages.
4.4 Marketing
With respect to advertising of [PRODUCT/SERVICE],
Franchisee agrees to consult with Franchisor and to keep
Franchisor reasonably appraised of its marketing plans and

activities and to comply with Franchisor's then-current
customary marketing support policies and practices to the extent
they are reasonable and practicable. Franchisor shall have the
right to approve such plans, and Franchisee shall provide a
timely opportunity for said approval by Franchisor. Franchisor
shall exercise its approval rights in a timely and reasonable
manner.
Should Franchisee fail to comply in good faith with its
obligations under Paragraph 3.4, Franchisor shall be entitled to
give written notice to Franchisee of such failure. In no event
shall Franchisor be obligated to provide such advertising which
it would otherwise have been obligated to provide during such
time as Franchisor's obligations hereunder were suspended
because of Franchisee's failure to fulfill its obligations under
this Paragraph 3.4.
4.5 Participating Franchises
While Franchisee cannot guarantee that its Franchises will
adopt the Agreement, Franchisee will use good faith
commercially reasonable efforts to recomme nd adoption of the
Agreement to its Franchises and anticipates a high level of
adoption thereby. Franchisor hereby agrees that each
Participating Franchise shall execute a letter agreement, which
has been approved by Franchisee in form and substance, in
favor of Franchisor, agreeing to be bound by the terms and
conditions of this Agreement as if it were a party hereto (the
"Participating Franchise"). Franchisee shall be liable for each
Participating Franchise's performance of its financial
obligations hereunder as if such Participating Franchise were a
Location. Franchisor shall have the right to proceed against
Franchisee for money only for any failure of a Participating
Franchise to fully perform the financial terms and conditions of
this Agreement. Participating Franchises shall be subject to the
same terms and conditions under the Agreement as Locations,

unless specifically designated otherwise. Implementation of the
Agreement at the Franchise level and Franchise payments there
under will be administered by Franchisor.
4.6 Placement
Franchisee shall exercise good faith commercially reasonable
efforts to maximize revenue on the [SALE OR RENTAL] of
[PRODUCT/SERVICE]. At all times during the entire Revenue
Sharing Period, Franchisee shall make available for [SALE OR
RENTAL] at each Location all of the [PRODUCT/SERVICE]
purchased for such Location.
4.7 Packing and Shipping
Franchisor will be solely responsible for making
[PRODUCT/SERVICE] ready for consumer
[PURCHASE/RENTAL] and for shipping the
[PRODUCT/SERVICE] from its distribution center to
Franchisee’s Locations.
4.8 Returns/Exchanges
The purchase requirements set forth in Paragraph 3.1 shall not
be subject to any returns by Franchisee. Franchisor will
exchange defective or damaged products. Defective products
shall mean those that are mechanically defective, mis-packaged,
physically blemished or contain extraneous material. Franchisee
shall report defective or damaged products to Franchisor
promptly following discovery of such defect or damage.
4.9 Location Count
Franchisee will report to Franchisor on a calendar month basis
the number of currently operating Locations, including
Participating Franchises, non-participating Franchises, New

Franchisor Locations and recently closed Locations.
4.10 Demographic Information
Franchisee will provide to Franchisor, on an ongoing basis,
information regarding the demographic make-up generally of
Franchisee customers.
5. COMMITMENTS
5.1 Marketing Support
In lieu of specific marketing support programs such as rebate,
co-op and ABFD programs, and as payment for services and in
consideration for the various other services and activities which
Franchisee has agreed to perform hereunder for the benefit of
Franchisor, such as sales and rental reporting functions,
Franchisor agrees to credit on a per [PRODUCT/SERVICE]
basis (on the relevant invoice) Franchisee with marketing
support funds ("Marketing Support Funds") in the amount of
[SPECIFY] OR of in the amount of [SPECIFY PERCENTAGE]
of the Purchase Price generated by [PRODUCT/SERVICE].
Marketing Support Funds shall not be used to advertise,
promote or otherwise market product not distributed by
Franchisor. In addition to Marketing Support Funds, Franchisor
shall continue to provide Franchisee with standard [IN-
STORE/ON-LOCATION] point of purchase marketing materials
as customarily utilized by Franchisor.
A. Franchisee shall use all of the Marketing Support Funds to
advertise in measured media [PRODUCT/SERVICE]. With
respect to said advertising of [PRODUCT/SERVICE],
Franchisee agrees to consult with Franchisor and to keep
Franchisor reasonably appraised of its marketing plans and
activities and to comply with Franchisor then-current customary

marketing support policies and practices to the extent that they
are reasonable and practicable. Franchisor shall have the right
to approve such plans, and Franchise shall provide a timely
opportunity for said approval by Franchisor. Franchisor shall
exercise approval rights in a timely and reasonable manner.
B. With respect to [SPECIFY PERCENTAGE] of the Marketing
Support Funds, Franchisor and Franchisee shall jointly
determine how said monies will be used to advertise, promote or
otherwise market [PRODUCT/SERVICE].
C. Franchisor shall use [SPECIFY PERCENTAGE] of the
Marketing Support Funds for [IN-STORE/ON-LOCATION]
[PRODUCT/SERVICE] specific marketing and promotion.
D. Should Franchisee fail to comply in good faith with its
obligations under paragraphs 4.1 A, B and C, Franchisor shall
be entitled to give written notice to Franchisee of such failure.
If Franchisee fails to remedy such failure to Franchisor's
satisfaction within [NUMBER] calendar days following receipt
of such notice, Franchisor shall be relieved of its obligations to
provide Marketing Support Funds, until such time as Franchisee
complies in good faith with its obligations under this Paragraph
4.1 D. In no event shall Franchisee be entitled to receive
Marketing Support Funds which would otherwise have accrued
during such time as Franchisee's rights hereunder were
suspended because of its failure to fulfill its obligations under
this Paragraph 4.1 D.
6. ELECTRONIC REPORTING
At no cost or expense to Franchisor, Franchisee will provide to
Franchisor, electronically, daily access to all Franchisee
[PRODUCT/SERVICE] information along with weekly
summaries, in such form as may be reasonably specified by

Franchisor from time to time, of all performance information as
to Franchisee's [SALE OR RENTAL] of
[PRODUCT/SERVICE], including, but not limited to, daily
[SALES OR RENTAL] data, daily inventory and daily Revenue
from each Location on a Location by Location,
[PRODUCT/SERVICE] by [LOCATION] basis.
7. REVIEW
Within [SPECIFY NUMBER OF DAYS] calendar days
following the end of each Contract Year, the parties shall meet
and in good faith review the terms of this Agreement. Should no
agreement be reached between the parties with respect to
adjusting or amending the terms of the Agreement, the then
current terms of the Agreement shall remain in full force and
effect. Within the [SPECIFY NUMBER OF DAYS] calendar
days following the end of the [SPECIFY] month of the Term,
either party may give [NUMBER] months’ notice to terminate
the Agreement. If such notice is given by either party, from
such notification forward, Franchisee shall have no right or
obligation to purchase additional [PRODUCT/SERVICE] under
this Agreement and Franchisor shall be relieved of any right or
obligation to sell [PRODUCT/SERVICE] to Franchisee under
this Agreement.
8. TERMINATION
The following transactions or occurrences shall constitute
material events of default (each an "Event of Default") by the
applicable party (the "defaulting party") hereunder such that, in
addition to and without prejudice to or limiting any other rights
and remedies available to the non-defaulting party at law or in
equity the non-defaulting party may elect to immediately and
prospectively terminate this Agreement at the sole discretion of
the non-defaulting party by giving written notice thereof to the

other party at any time after the occurrence of an Event of
Default setting forth sufficient facts to establish the existence
of such Event of Default.
8.1 Material Breach
A material breach by a party of any material covenant, material
warranty, or material representation contained herein, where
such defaulting party fails to cure such breach within
[NUMBER] calendar days after receipt of written notice
thereof, or within such specific cure period as is expressly
provided for elsewhere in this Agreement; or
8.2 Insolvency and/or Bankruptcy
A party makes an attempt to make any arrangement for the
benefit of creditors, or a voluntary or involuntary bankruptcy,
insolvency or assignment for the benefit of creditors of a party
or in the event any action or proceeding is instituted relating to
any of the foregoing and the same is not dismissed within
[NUMBER] calendar days after such institution; or
8.3 Failure to Make Payment
A failure by either party to make payment of any monies
payable pursuant to this Agreement as, and when payment is
due. Except as otherwise provided herein, no termination of this
Agreement for any reason shall relieve or discharge any party
hereto from any duty, obligation or liability hereunder which
was accrued as of the date of such termination.
9. PUBLIC DISCLOSURE AND CONFIDENTIALITY
9.1 Public Disclosure
Each party agrees that no press release or public announcement
relating to the existence or terms of this Agreement (including
within the context of a trade press or other interview or

advertisement in any media) shall be issued without the express
prior written approval of the other party hereto.
9.2 Confidential Information
During the Term and for a period of [SPECIFY
YEARS/MONTHS] thereafter, Franchisee and Franchisor shall
hold, and shall cause each of their directors, officers, employees
and agents to hold in confidence the terms of this Agreement
(including the financial terms and provisions hereof and all
information received pursuant to, or developed in accordance
with, this Agreement) specifically including but not limited to
the Franchisor. Franchisee and Franchisor hereby acknowledge
and agree that all information contained in, relating to or
furnished pursuant to this Agreement, not otherwise known to
the public, is confidential and proprietary and is not to be
disclosed to third parties without the prior written consent of
both Franchisee and Franchisor. Neither Franchisee nor
Franchisor shall disclose such information to any third party
(other than to officers, directors, employees, attorneys,
accountants and agents of Franchisee and Franchisor or the
affiliates of either, who have a business reason to know or have
access to such information, and only after each of whom agrees
to being bound by this paragraph) except:
a. To the extent necessary to comply with any Law or the valid
order of a governmental agency or court of competent
jurisdiction or as part of its normal reporting or review
procedure to regulatory agencies or as required by the rules of
any major stock exchange on which either party's stock may be
listed; provided, however, that the party making such disclosure
shall seek, and use reasonable efforts to obtain, confidential
treatment of said information and shall promptly, to the greatest
extent practicable, notify the other party in advance of such
disclosure;

b. As part of the normal reporting or review procedure by its
parent Franchisee, its auditors and its attorneys;
c. To the extent necessary to obtain appropriate insurance, to its
insurance agent or carrier, that such agent or carrier agrees to
the confidential treatment of such information; and
d. To actual or potential successors in interest, provided,
however, that such person or entity shall have first agreed in
writing to the confidential treatment of such information.
10. NO RIGHT TO USE NAMES
a. Neither Franchisee nor Locations nor Participating Franchises
shall acquire any right to use, nor shall use any copyrights,
trademarks, characters or designs owned or controlled by
Franchisor or any of its Affiliates, including without limitation,
the names [SPECIFY], alone or in conjunction with other words
or names, in any advertising, publicity or promotion, either
express or implied, without Franchisor's prior consent in each
case, and in no case shall any Franchisee or Location
advertising, publicity, or promotion, express or imply any
endorsement of the same.
b. Franchisee shall not acquire any right to use, nor shall use
the name [SPECIFY] alone or in conjunction with other words
or names, or any copyrights, trademarks, characters or designs
of the same in any advertising, publicity or promotion, either
express or implied, without Franchisor's prior consent in each
case, and in no case shall any Franchisee advertising, publicity,
or promotion, express or imply any endorsement of the same.
11. ASSIGNMENT

This Agreement and the rights and licenses granted hereunder
are personal and neither party shall have the right to sell,
assign, transfer, mortgage, pledge nor hypothecate (each an
"Assignment") any such rights or licenses in whole or in part
without the prior written consent of the non-assigning party, nor
will any of said rights or licenses be assigned or transferred to
any third party by operation of law, including, without
limitation, by merger or consolidation or otherwise; provided,
however, that an Assignment pursuant to or resulting from a
sale of all or substantially all of the assets or all or a majority
of the equity of Franchisee to any Person or Persons or any
other form of business combination, such that the Franchisee
business as currently existing remains substantially intact,
including, without limitation, a sale to the public, shall not
require such consent so long as such Assignment is not to
[SPECIFY]; and provided further that any Assignment by (i)
Franchisee, to [SPECIFY] or (ii) Franchisor to any Affiliate of
Franchisor. In the event that Franchisee or Franchisor assigns
its rights or interest in or to this Agreement in whole or in part,
the assigning party will nevertheless continue to remain full y
and primarily responsible and liable to the other party for
prompt, full, complete and faithful performance of all terms and
conditions of this Agreement.
12. AUDIT RIGHTS
a. During the Term and continuing until [SPECIFY] months
following the date of expiration or earlier termination of this
Agreement Franchisor may, audit the financial books,
information systems and records of Franchisee as reasonably
necessary to verify Franchisee's compliance with its obligations
under this Agreement; provided, however, that
i. Such audit shall be at the sole cost and expense of Franchisor
(unless such audit reveals that payments due to Franchisor for

any [SPECIFY] month period were understated by more than
[SPECIFY] percent, in which case, in addition to all other rights
which Franchisor may have, Franchisee shall promptly
reimburse Franchisor to the extent of its reasonable out-of-
pocket costs of such audit);
ii. Franchisor may not audit more than twice per year (and no
such audit shall continue for more than [NUMBER] calendar
days from the date the auditors are given access to the
applicable records), and
iii. Any such audit shall be conducted only during regular
business hours and in such a manner as not unreasonably to
interfere with the normal business activities of Franchisee.
b. Franchisee shall keep and maintain complete and accurate
books of account and records in connection with its obligations
under this Agreement at its principal place of business until the
date [SPECIFY] months following the date of rendering of the
initial statement reflecting such records unless a legal action
with regard thereto is commenced during such period.
c. During the Term and continuing until [SPECIFY] months
following the date of expiration or earlier termination of this
Agreement, Franchisor may inspect and audit the books, records
and store premises of Locations and Participating Franchises as
reasonably necessary to verify compliance with this Agreement;
provided, however, that
d. Such audit shall be at the sole cost and expense of Franchisor
(unless such audit reveals that payments due to Franchisor for
any [NUMBER] month period were understated by more than
[%], in which case, in addition to all other rights which
Franchisor may have, Franchisee shall promptly reimburse
Franchisor to the extent of its reasonable out-of-pocket costs of
such audit), and (b) any such audit shall be conducted only

during regular business hours and in such a manner as not
unreasonably to interfere with the normal business activities of
Location or Participating Franchises.
13. FRANCHISOR'S REPRESENTATIONS AND
WARRANTIES
Franchisor represents and warrants that:
a. It is a corporation organized and existing under the laws of
[SPECIFY COUNTRY AND/OR STATE/PROVINCE] with its
principal place of business in [SPECIFY COUNTRY];
b. The undersigned has the full right, power and authority to
sign this Agreement on behalf of Franchisor;
c. The execution, delivery and performance of this Agreement
does not and will not, violate any provisions of [COUNTRY]
articles or certificates of incorporation and bylaws, or any
contract or other Agreement to which Franchisor is a party;
d. There is no broker, finder or intermediary involved in
connection with the negotiations and discussions incident to the
execution of this Agreement, and no broker, finder, agent or
intermediary who might be entitled to a fee, commission or any
other payment upon the consummation of the transactions
contemplated by this Agreement;
e. This Agreement has been duly executed and delivered and
constitutes a legal, valid and binding obligation, enforceable in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereinafter in effect, affecti ng the
enforcement of creditors' rights in general and by general
principles of equity, regardless of whether such enforceability is

considered in a proceeding in equity or at law.
14. FRANCHISEE'S REPRESENTATIONS AND
WARRANTIES
Franchisee represents and warrants that:
a. It is a corporation organized and existing under the laws of
the [SPECIFY COUNTRY AND/OR STATE/PROVINCE] with
its principal place of business in the [SPECIFY COUNTRY];
b. The undersigned has the full right, power and authority to
sign this Agreement on behalf of Franchisee;
c. There is no broker, finder or intermediary involved in
connection with the negotiations and discussions incident to the
execution of this Agreement, and no broker, finder, agent or
intermediary who might be entitled to a fee, commission or any
other payment upon the consummation of the transactions
contemplated by this Agreement;
d. This Agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligation of Franchisee
enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereinafter in effect, affecting the enforcement of creditors'
rights in general and by general principles of equity, regardless
of whether such enforceability is considered in a proceeding in
equity or at law; and
e. The execution, delivery and performance of this Agreement
does not, and will not, violate any provisions of Franchisee's
articles or certificates of incorporation and bylaws, or any
contract or other Agreement to which Franchisee is a party.

15. FORCE MAJEURE
The duties and obligations of the parties hereunder may be
suspended upon the occurrence and continuation of any "Event
of Force Majeure" which inhibits or prevents performance
hereunder, and for a reasonable start-up period thereafter. An
"Event of Force Majeure" shall mean any act, cause,
contingency or circumstance beyond the reasonable control of
such party (whether or not reasonably foreseeable), including,
without limitation, to the extent beyond the reasonable control
of such party, any governmental action, nationalization,
expropriation, confiscation, seizure, allocation, embargo,
prohibition of import or export of goods or products, regulation,
order or restriction (whether foreign, federal or state), war
(whether or not declared), civil commotion, disobedience or
unrest, insurrection, public strike, riot or revolution, lack or
shortage of, or inability to obtain, any labor, machinery,
materials, fuel, supplies or equipment from normal sources of
supply, strike, work stoppage or slowdown, lockout or other
labor dispute, fire, flood, earthquake, drought or other natural
calamity, weather or damage or destruction to plants and/or
equipment, commandeering of vessels or other carriers resulting
from acts of God, or any other accident, condition, cause,
contingency or circumstances including (without limitation, acts
of God) within or without [COUNTRY]. Either party shall, in
any manner whatsoever, be liable or otherwise responsible for
any delay, or default in, or failure of, performance resulting
from or arising out of or in connection with any Event of Force
Majeure and no such delay, default in, or failure of,
performance shall constitute a breach by either party hereunder.
As soon as reasonably possible following the occurrence of an
Event of Force Majeure, the affected party shall notify the other
party, in writing, as to the date and nature of such Event of
Force Majeure and the effects of same. If any Event of Force

Majeure shall prevent the performance of a material obligation
of either party hereunder, and if the same shall have continued
for a period of longer than [SPECIFY] days, then either party
hereto shall have the right to terminate this Agreement by
written notice to the other party hereto.
16. INDEMNIFICATION
Each party (the "Indemnifying Party") shall indemnify and hold
the other party and its affiliates and their respective employees,
officers, agents, attorneys, stockholders and directors, and their
respective permitted successors, licensees and assigns (the
"Indemnified Party(ies)") harmless from and against (and shall
pay as incurred) any and all claims, proceedings, actions,
damages, costs, expenses and other liabilities and losses
(whether under a theory of strict liability, or otherwise) of
whatsoever kind or nature
("Claim(s)") incurred by, or threatened, imposed or filed
against, any Indemnified Party (including, without limitation,
(a) actual and reasonable costs of defense, which shall include
without limitation court costs and reasonable attorney and other
reasonable expert and reasonable third party fees; and (b) to the
extent permitted by Law, any fines, penalties and forfeitures) in
connection with any proceedings against an Indemnified Party
caused by any breach (or, with respect to third party claims
only, alleged breach) by the Indemnifying Party of any
representation, term, warranty or agreement hereunder. Neither
party shall settle, compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or
threatened Claim in respect of which the Indemnified Party is
entitled to indemnification hereunder (whether or not the
Indemnified Party is a party thereto), without the prior written
consent of the other party hereto; provided, however, that the
Indemnifying Party shall be entitled to settle any claim without
the written consent of the Indemnified Party so long as such
settlement only involves the payment of money by the

Indemnifying Party and in no way affects any rights of the
Indemnified Party.
17. REMEDIES
No remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy
which is otherwise available at law, in equity, by statute or
otherwise, and except as otherwise expressly provided for
herein, each and every other remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or
now or hereafter existing at law, in equity, by statute or
otherwise and no provision hereof shall be construed so as to
limit any party's available remedies in the event of a breach by
the other party hereto. The election of any one or more of such
remedies by any of the parties hereto shall not constitute a
waiver by such party of the right to pursue any other available
remedies.
18. DEFINITIONS
A. "Affiliate" shall mean an entity in which either party has a
controlling interest.
B. "Franchise" shall mean all Franchisee Locations which
Franchisee informs Franchisor are Franchises.
C. "Laws" shall mean all international, federal, national, state,
provincial, municipal or other laws, ordinances, orders, statutes,
rules or regulations.
D. "Location" shall mean any Location in [COUNTRY] or
[COUNTRY], which, at any time during the Term of this
Agreement, is wholly owned and/or operated by Franchisee,

whether or not such Location is operated under the "Franchisee"
trademarks. Should Franchisee undertake to own or operate
outlets different than the outlets it has traditionally operated,
such as by way of example, kiosks, carts, "Locations within a
Location", "rack jobbing" operations or vending machines, the
parties shall negotiate in good faith to agree upon terms for the
inclusion of such retail outlets in this Agreement.
E. "New Franchisee Location" shall mean a Location which
Franchisee or any of its Franchisees or Affiliates first owns or
operates after the commencement date of this Agreement,
excluding Franchisee's acquisition of franchised Franchisee
Locations.
F. "Revenue Sharing Period" shall mean the period commencing
on [SPECIFY DATE] and running through until the end of
[SPECIFY PERIOD].
19. MISCELLANEOUS
A. This Agreement shall not constitute any partnership, joint
venture or agency relationship between the parties hereto. The
parties shall be considered independent contractors.
B. This Agreement, together with the attached [EXHIBITS IF
INCLUDED], embodies the entire understanding of the parties
with respect to the subject matter hereof and may not be altered,
amended or otherwise modified except by an instrument in
writing executed by both parties.
C. The headings in this Agreement are for convenience of
reference only and shall not have any substantive effect.
D. All rights and remedies granted to the parties hereunder are
cumulative and are in addition to any other rights or remedies

that the parties may have at law or in equity.
E. Should any non-material provision of this Agreement be held
to be void, invalid or inoperative, as a matter of law the
remaining provisions hereof shall not be affected and shall
continue in effect as though such unenforceable provision(s)
have been deleted from this Agreement.
F. Unless otherwise indicated, all dollar amounts referenced
herein shall refer to and be paid in [COUNTRY] dollars.
G. No waiver of any right under or breach of this Agreement
shall be effective unless it is in writing and signed by the party
to be charged.
H. This Agreement shall be governed by and construed in
accordance with the internal Laws of [SPECIFY], applicable to
Agreements entered into and wholly performed therein.
Franchisee hereby consents to and submits to the jurisdiction of
the Franchisor and any action or suit under this Agreement may
be brought in any Court with appropriate jurisdiction over the
subject matter established.
I. None of the provisions of this Agreement is intended for the
benefit of or shall be enforceable by any third parties.
J. This Agreement may be executed in separate counterparts
each of which shall be an original and all of which taken
together shall constitute one and the same Agreement.
K. All notices shall be in writing and either personally
delivered, mailed first-class mail (postage prepaid), sent by
reputable overnight courier service (charges prepaid), or sent by
transmittal by any electronic means whether now known or
hereafter developed, including, but not limited to, email,
facsimile, telex, or laser transmissions, able to be received by

the party intended to receive notice, to the parties at the
following addresses:
Franchisor Address:
[YOUR COMPLETE ADDRESS]
Franchisee Address:
[SPECIFY]
20. GOVERNING LAW
This Agreement shall be governed by, and construed under, the
laws of [State/Province] of [STATE/PROVINCE].
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
FRANCHISOR FRANCHISEE

Authorized Signature Authorized Signature
Print Name and Title Print Name and Title

worldwide.erau.edu
CHECKLIST
BASIC FRANCHISE AGREEMENT TERMS
One of the most popular way to start your own company is
through a franchise; 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. Franchise agreements vary from franchise to
franchise so it would be impossible to identify every term and
issue that should be considered in all situations. The checklist
should be used in conjunction with the franchise agreement –
the document that will set out all the terms and conditions that
will govern your ownership of the franchise – which will be
drafted by the franchisor. In any event, you shouldn’t sign it
until you’ve discussed your options with your attorney.
Issues relating to the franchise cost terms
· What is the initial franchise fee? Is any part or the entire
initial fee refundable?
· Does it include an ‘’opening'' inventory of products and
supplies?
· What are the payment terms: amount, time of payment, lump
sum or installment, financing arrangements, etc.?
· Does the franchisor offer any financing, or offer help in
finding financing?
· Are there any deferred balances? If so, who finances and at
what interest rate?
· Does the contract clearly distinguish between ``total cost'' and
`ìnitial fee,'' `ìnitial cash required,'' or `ìnitial costs,'' etc.?
· Are there periodic royalties? If so, how much are they and
how are they determined?
· How and when are sales and royalties reported, and how are

royalties paid?
· If royalty payments are in whole or part payment for services
by the franchisor, what services will be provided?
· Are accounting/bookkeeping services included or available?
· How are advertising and promotion costs divided?
· Is a specified amount of working capital required of the
franchisee to cover operating costs until profits can be made?
· Must premises be purchased or rented, and are there further
conditions on either of these (from franchisor, selected site,
etc.)?
· How and by whom will the building be financed, if purchased?
· Does the franchisee have to make a down payment for
construction and/or equipment?
Issues relating to the franchise location terms
· Does the franchise apply to a specific geographical area? If so,
are the boundaries clearly defined?
· Who has the right to select the site?
· Will other franchisees be permitted to compete in the same
area, now or later?
· Is the territory an exclusive one, and is it permanent or subject
to reduction or modification under certain conditions?
· Does the franchisee have a first refusal option as to any
additional franchises in the original territory if it is not

exclusive?
· Does the franchisee have a contractual right to the franchisor's
latest products or innovations? If so, at what cost?
· Will the franchisee have the right to use his own property
and/or buildings? If not, will the franchisor sell or lease his
property to the franchisee?
· Who is responsible for obtaining zoning variances, if
required?
Issues relating to the buildings, equipment and supplies terms
· Are plans and specifications of the building determined by the
franchisor? If so, does this control extend to selection of
contractor and supervision of construction?
· Are there any restrictions on remodeling or redecorati ng?
· Must equipment or supplies be purchased from the franchisor
or approved supplier, or is the franchisee free to make his own
purchases?
· When the franchisee must buy from the franchisor, are sales
considered on consignment? Or will they be financed and, if so,
under what terms?
· Does the agreement provide for continuing supply and
payment of inventory (by whom, under what terms, etc.)?
· Does the franchise agreement bind the franchisee to a
minimum purchase quota?

· What controls are spelled out concerning facility appearance,
equipment, fixture and furnishings, and maintenance or
replacement of the same? Is there any limitation on
expenditures involved in any of these?
· Does the franchisor have a group insurance plan? If not, what
coverage will be required, at what limits and costs? Does the
franchisor require that it be named as an insured party in the
franchisee liability coverage?
Issues relating to the operating practices terms
· Must the franchisee participate personally in conducting the
business? If so, to what extent and under what specific
conditions?
· What degree of control does the franchisor have over franchise
operations, particularly in maintaining franchise identity and
product quality?
· What continuing management aid, training and assistance will
be provided by the franchisor, and are these covered by the
service or royalty fee?
· Will advertising be local or national and what will be the cost-
sharing arrangement, if any, in either case?
· If local advertising is left to the franchisee, does the
franchisor exercise any control over such campaigns or share
any costs?
· Does the franchisor provide various promotional materials
point-of-purchase, mail programs, etc. and at what cost?
· What are bookkeeping, accounting and reporting requirements,

and who pays for what?
· Are sales or service quotas established? If so, what are the
penalties for not meeting them?
· Are operating hours and days set forth in the franchise
contract?
· Are there any limits as to what is or can be sold?
· Does the franchisor arrange for mass purchasing and is it
mandatory for the franchisee to be a participant buyer?
· Who establishes hiring procedures initially and through the
franchise term?
Issues relating to termination and renewal terms
· Does the franchisor have absolute privilege of terminating the
franchise agreement if certain conditions have not been met,
either during the term or at the end?
· Does the franchise agreement spell out the terms under which
the franchisor may repurchase the business?
· Does the franchisor have an option or duty to buy any or all of
the franchisee's equipment, furnishings, inventory, or other
assets in the event the franchise is terminated for good cause,
by either party?
· If the preceding situation occurs, how are purchase terms
determined?
· Is there provision for independent appraisal? Is any weight

given to good will or franchisee equity in the business?
· Does the original agreement include a clause that the
repurchase price paid by the franchisor should not exceed the
original franchise fee? If so, this eliminates any compensation
for good will or equity.
· Under what conditions (illness, etc.) can the franchisee
terminate the franchise? In such cases, do termination
obligations differ?
· Is the franchisee restricted from engaging in a similar business
after termination? If so, for how many years?
· If there is a lease, does it coincide with the franchise term?
· Does the contract provide sufficient time for amortization of
capital payments?
· Has the franchisor, as required, provided for return of
trademarks, trade names, and other identification symbols and
for the removal of all signs bearing the franchisor's name and
trademarks?
Other points to consider
· Can the franchisee sell the franchised business and assign the
franchise agreement to the buyer?
· Is the franchise assignable to heirs, or may it be sold by the
franchisee's estate on death or disability?
· Does the lease permit assignment to any permitted assignee of

the franchisee?
· How long has the franchisor conducted business in its
industry, and how long has it granted franchises?
· How many franchises and company-owned outlets are claimed,
and can they be verified?
· If there is a trade name of a well-known person involved in the
franchise, is he active, does he have any financial interest; does
he receive compensation for work or solely for use of his name,
etc.?
· Are all trademarks, trade names, or other marks fully
identifiable and distinct, and are they clear of any possible
interference or cancellation owing to any pending litigation?
· What is the duration of any patent or copyright material to the
franchise? If time is limited, does the franchisor intend to
renew, and is this spelled out in the franchise agreement?
· Has the franchisor met all law requirements (registration,
escrow or bonding requirements, etc.), if applicable?
· Are there laws governing franchisor/franchisee relationships,
including contract provisions, financing arrangements and
terminations? If so, does the contract meet all requirements?

TRANSCRIPT – Introduction to Franchising
Introduction to Franchising
1.1 Introduction
Welcome to SBA’s online training course: Introduction to
Franchising
The SBA’s Office of Entrepreneurship Education provides this
self-paced training exercise as An
Introduction to Franchising basics. You will find this course
easy to follow and the subject
matter indexed for quick reference and easy access. It will take
about 30 minutes to complete the
course. Additional time will be needed to review included
resource materials and to complete the
suggested next steps at the end of the course.
As audio is used throughout the training, please adjust your
speakers accordingly. A transcript

and keyboard shortcuts are available to further assist with user
accessibility.
When you complete the course, you will have the option of
receiving a completion confirmation
from the SBA.
1.2 Course Objectives
This course has four key objectives.
One, define franchising and the types of franchises.
Two, explain the pros and cons of owning a franchise.
Three, discuss the components of a Franchise Disclosure
Document.
Four, identify resources to assist you in franchising a business.
1.3 Course Topics
There are several topic sections within the course. Each section
covers a different aspect of
franchising. Some of the areas covered include:
owning a franchise

Numerous additional resources are identified to assist you. Visit
the resource icon in the course
player or locate additional tools, templates, and mentors on
SBA.gov once you finish the course.
Let’s get started!
1.4 What Is Franchising?
Owning your own franchise can be a great way to start a small
business without taking on the
risks that are associated with starting from scratch.
A franchise is a license to use the name, trademarks, and
proprietary products of an existing
company. Owning a franchise allows you to distribute the
company’s products as well as to use
Page 1 of 6

their business systems. These may include national marketing,
accounting, point-of-sales
information, site selection, and site acquisition.
In exchange for these rights and services, the franchisor
receives an upfront fee for the rights to a
geographic area, as well as royalties based on sales.
1.5 Types of Franchises
There are two primary forms of franchising: product/trade name
franchising and business format
franchising.
In product /trade name franchising, a franchisor owns the right
to the name or trademark and
sells that right to a franchisee. This is most often seen in the
soft drink or automotive industry,
where a product is sold or distributed through a franchisee.
Business format franchising is when the franchisor and
franchisee have an ongoing relationship,
and the franchisor provides a full range of services, including
site selection, training, product
supply, marketing plans, and even assistance in obtaining
financing.
1.6 The Pros and Cons of Owning of a Franchise
In order to determine whether franchising is right for you, you
must first evaluate the pros and
cons.
A good franchise offers site selection assistance, training,
purchasing power, marketing plan,

brand recognition, and financing.
The cons of owning a franchise include the lack of control of
certain business decisions, such as
marketing and product offerings; the length of contracts; and
the cost of exiting the franchise.
1.7 Investigating Your Options
There are approximately 3,000 different franchise companies
operating in 80 different industries.
So how do you know which company is right for you? The
answer is Market Research.
Franchise opportunities can be identified through Internet
research, in magazines such as
Entrepreneur, Success, and Inc., or in various trade journals
such as the Franchising World, Wall
Street Journal and USA Today.
You can also reach out to franchisors to help you during this
process.
1.8 Research the Franchisor
Once you have conducted market research and decided on a
business that you are interested in,
the next step is to research the franchisor. You risk losing a
significant amount of money if you
do not investigate a business carefully before you buy.
By law, franchise sellers must disclose certain information
about their business to potential
buyers. Make sure you get all the information you need first,
before entering into this form of
business.

Consider the following questions during your research:
1. How long has the franchisor been in the industry?
Page 2 of 6
2. How many are currently operating in your area?
3. What is the financial health of the franchisor?

4. Are there any current or pending legal issues faced by the
franchisor?
Take the time to talk to other franchisees to get a first-hand
account of their experience with the
franchisor.
1.9 Franchise Package
During your research, you will also want to take a detailed look
at the franchise package to see
what is included.
are licensing or other fees?
Royalties, advertising, insurance?

1.10 The Franchise Disclosure Document (FDD)
Once you identify a company that you are curious about, the
next step is to request and read
thoroughly the Franchise Disclosure Document, or FDD. The
FDD defines what the franchisor
will do for you and what is expected of you. Each franchisor is
legally required to provide this
document to potential franchisees.
There are 23 important sections to the FDD.
Sections 1 through 4 contain information pertaining to the
history of the franchisor
company, their business experience, litigation, and bankruptcy
details (if applicable).
Sections 5 through 10 outline the fees associated with the
franchise, such as initial
investment costs, royalties, advertising fees, and all financial
arrangements, including
restrictions as to sources of products and services.
Sections 11 through 19 detail the franchisee’s obligations
and provisions in the
agreement. These are very important, as they define what
restrictions there are on
products that can be sold, transfer assignments, terminations,
and dispute resolutions.
This section also includes information about advertising,
computer systems, and training.
Sections 20 through 23 provide a list of existing
franchisees, those that are active and
those that have left the company. They also provide financial
statements of the franchisor

and copies of contracts used in connection with the franchise
offering, including the
Franchise Agreement.
Page 3 of 6
1.11 Personal Assessment
Before you decide to invest in a franchise, you should first ask
yourself a few important
questions relating to your personal ambitions, goals, and needs.

Consider the following questions:
how much you can invest?
Remember, this is about you. Focus on the best possible
company that will be able to meet all of
your needs.
1.12 Advice and Counseling
During this process you should also consider seeking advice
from franchise consultants,
franchise attorneys, accountants, and other business experts.
The primary goal of the franchise consultant is to match
the needs, skill sets, and business
objectives of the prospective franchisee with the right franchise
and franchisor. A
franchise consultant also helps guide the research process and
can offer advice on
financing options.
A franchise attorney will help you review the lease
agreement and the incorporation
documents, as well as providing relevant legal advice.

The franchise accountant will help you by reviewing the
franchisor’s financials.
A reliable lender will help secure the financing that best
fits your business model.
And a professional site locator is valuable in selecting and
securing the right site for your
franchise.
It is important to find organizations and individuals that can
guide you every step of the way
during your research before you decide to purchase a franchise.
Networking with other business
owners, Chambers of Commerce, and friends are some
approaches to finding help.
1.13 Summary
Now that we’ve covered the basics of franchising, you should
be able to:
of a Franchise Disclosure Document
Page 4 of 6

1.14 Next Steps
If you are serious about franchising a business, consider taking
the following steps:
Step 1: Be a Detective. In addition to the routine
investigation that should be conducted
prior to any business purchase, contact other franchisees before
deciding to invest. You
can obtain a Uniform Franchise Offering Circular (UFOC),
which contains vital details
about the franchise's legal, financial, and personnel history,
before you sign a contract.
Step 2: Know What You are Getting Into. Before entering
into any contract as a
franchisee, you should make sure that you would have the right
to use the franchise name
and trademark, receive training and management assistance
from the franchisor, use the

franchisor's expertise in marketing, advertising, facility design,
layouts, displays, and
fixtures, and do business in an area protected from other
competing franchisees.
Step 3: Seek Professional Help. The tax rules surrounding
franchises are often complex,
and an attorney, preferably a specialist in franchise law, should
assist you in evaluating
the franchise package and tax considerations. An accountant
may be needed to determine
the full costs of purchasing and operating the business, as well
as to assess the potential
profit to the franchisee.
1.15 Resources
SBA has a broad network of skilled counselors and business
development specialists. Below is a
short description of our resource partners:
Small Business Development Centers (SBDCs) are
associated with institutions of higher
education – universities, colleges, and community colleges.
More than 900 SBDCs offer
no-cost, extensive, one-on-one, long-term professional business
advising, low-cost
training, and other specialized services such as procurement,
manufacturing, and
technology assistance, which are critical to small business
growth.
SCORE offers free, confidential small business advice
from successful entrepreneurs.
SCORE is a nationwide program and boasts more than 12,000
volunteers to give you

guidance to grow your business.
Women’s Business Centers (WBCs) provide free
management and technical assistance to
help women and men start and grow small businesses. There are
over 100 WBCs located
throughout the U.S. and Puerto Rico.
SBA’s 84 District and Branch offices connect
entrepreneurs to resources, products, and
services that can help them start, manage, and grow their
business. These offices are
located in all 50 states, Puerto Rico, the U.S. Virgin Islands,
and Guam.
The SBA Learning Center is an online portal that hosts a
variety of self-paced online
training courses, quick videos, web chats, and more to help
small business owners
explore and learn about the many aspects of business ownership.
Content is filtered by
topic, so no matter what the stage of your business, or the kind
of insight you need, you
can quickly get answers.
Find your local resource using our handy ZIP-code tool by
visiting www dot SBA dot gov slash
local assistance.
Page 5 of 6

1.16 Have a Question?
-800 U ASK SBA (1-800 827-5722)
-mail SBA at [email protected]
an SBDC office near you at
www.sba.gov/local-assistance
SBA online content, please
email: [email protected]
1.17 Certificate
Congratulations on completing this course. We hope it was
helpful and provided a good working
knowledge of franchising. Click the certificate to receive a
course completion confirmation from
the U.S. Small Business Administration.
Page 6 of 6
mailto:[email protected]
www.sba.gov/local-assistance
mailto:[email protected]

worldwide.erau.edu
FRANCHISE FEASIBILITY TEST
Use this form to help you determine the feasibility of your
business as a franchisable concept. Answer each question,
assigning a rating of 1-5 for each question, with 5 being the
strongest. Total each column after you’ve finished, then add all
five columns together for a grand total. The higher the score,
the more potential the concept has of becoming a successful
franchise.
1
2
3

4
5
Does your business have an established track record of more
than five years?
Do you and/or any of your partners have experience in the
business greater than the period of time your business has been
in operation?
Does your business have 10 or more locations?
During the time your business has been in operation, has it
maintained average net profits in each location of more than
$200,000?
Does the business generate repeat customers on a frequency
greater than two times per month?

Does the business attract customers from a 5 mile radius or
greater?
Do you have more than $250,000 to invest in the development
of your franchise concept?
Do you and/or any of your partners have business management
experience greater than 10 years?
Will the start-up requirements for franchisees be less than
$25,000?
Are training requirements less than three months?

Does your business have international adaptability?
Rate the competitiveness of your industry.
Have you received more than 10 franchising inquiries in the last
year?
TOTAL OF EACH COLUMN
GRAND TOTAL

[Type here]
Massie, Raymond7/3/2019
For Educational Use Only
§ 50:5.Form drafting guide, 4A Am. Jur. Legal Forms 2d § 50:5
worldwide.erau.edu
§ 50:5.Form drafting guide, 4A Am. Jur. Legal Forms 2d § 50:5
© 2019 Thomson Reuters. No claim to original U.S.
Government Works.
4A Am. Jur. Legal Forms 2d § 50:5

American Jurisprudence Legal Forms 2d | May 2019 Update
Chapter 50. Business Franchises
II. Basic Franchise Agreements
§ 50:5. Form drafting guide
Summary | Correlation Table
The single most important document in a franchising
arrangement is the franchise agreement between the franchisor
and the franchisee. It is from this instrument and the
relationship it creates that all responsibilities and benefits flow.
Obviously, a great deal of thought and planning needs to be
given to its preparation. The attorney responsible for its
language must have a basic understanding of the franchise
system and its problems. More specifically, he or she must have
a particular knowledge of that segment of franchising in which
his or her client is active, be it food, automobiles, or any of the
vast number of types of businesses that are franchised today.
The wording and the structure of the franchise agreement must
reflect this knowledge and understanding.1
A franchise agreement should, of course, be in writing, and
must be carefully drafted so as not to violate federal and state
business regulation statutes, such as antitrust laws.2
The so-called “exclusivity clause” in a franchise agreement is
intended to control the degree of protection to a franchisee from
competition resulting from the grant of another franchise, or
competition from an outlet owned and operated by the
franchisor. One method of creating complete exclusivity is to
define the franchisee’s area geographically. If this technique is
used, the boundaries should be designated by name and the
franchise area should be designated on a map attached to the
agreement as an exhibit.
Caution:
A geographical definition of a franchise territory poses a danger
to the franchisor in that the franchisee may be unable to meet

future consumer demands resulting from increased population
within the geographic territory. Open-ended exclusivity clauses
are used to alleviate this danger. One such type of open-ended
clause may be created by basing the franchise territory upon
both a fixed population number and a geographic area.
The term “package clause” refers to language in the franchise
agreement designating the services provided by the franchisor
in setting up the franchisee’s business. The extent of such
services by the franchisor depends in large part on the type of
franchise. For example, a prepared food franchise system may
have a distinctive store design and special types of equipment
that the franchisor will provide for the franchisee.
Counsel should take care to avoid antitrust violations when
drafting the package clause. A package clause, in specifying the
use of distinctive equipment by the franchisee, must not go
further in its specification than is reasonably necessary to
insure the integrity and quality of the product.3
The product control provisions of a franchise agreement are
designed to insure the quality and standardization of the product
through such devices as requiring the franchisee to purchase
specially formulated products, ingredients, supplies, and
merchandise. The type and extent of control will vary according
to the particular franchise.
The main problem involved when preparing product control
provisions is the avoidance of antitrust violations that arise
from improper tie-ins. A tying or tie-in arrangement is an
agreement by a party to sell one product but only on condition
that the buyer also purchase a different, or tied, product, or at
least agree that it will not purchase that product from any other
supplier. Courts traditionally have shown a willingness to
invalidate tying arrangements established by a franchise
agreement if (1) the franchisor has sufficient power in the tying

product market, (2) the amount of commerce affected is not
insubstantial, and (3) less burdensome alternatives exist. Except
where special circumstances and conditions justify such
arrangements, tying arrangements are illegal because they
lessen competition in the tied product and facilitate price
discrimination.4
Such unlawful tying arrangements may be avoided by drafting
the product control clause so that the franchisee may purchase
products from the franchisor or from an alternate source whose
products comply with reasonable standards of the franchisor. It
should be noted, however, that an otherwise illegal tying
arrangement may be justified as a necessary device for quality
control or protection of goodwill or is necessary to develop an
infant industry. A claim of business justification for what would
otherwise be an illegal tying arrangement also is available as a
defense.5
Franchise agreements usually include details concerning
numerous means of and grounds for termination. It is essential
to the avoidance of costly litigation to spell out clearly and
concisely the grounds on which either party may terminate, and
the consequences that flow from such termination.6 Federal and
state statutes should be consulted to determine particular
requirements of termination. For example, state statutes usually
require the franchisor to give the franchisee notice of
termination.7
Tax Note:
Federal tax aspects of franchise agreements should be carefully
considered in the preparation of such agreements.8
Westlaw. © 2019 Thomson Reuters. No Claim to Orig. U.S.
Govt. Works.
Footnotes

1
Legal Encyclopedias
Private franchise contracts, generally. Am. Jur. 2d, Private
Franchise Contracts §§ 1 et seq.
2
Legal Encyclopedias
Federal and state regulation of franchise agreements. Am. Jur.
2d, Private Franchise Contracts §§ 23 et seq.
3
Engbrecht v. Dairy Queen Co. of Mexico, Mo., 203 F. Supp.
714 (D. Kan. 1962) (franchise agreement which required use of
franchisor’s particular freezers and food formulas, and
prohibited use of name “Dairy Queen” in connection with any
product other than products of Dairy Queen freezers, as well as
requiring franchisee to dispense products in paper cups and
other containers having imprinted Dairy Queen design, held
lawful as not in conflict with Section 3 of the Clayton Act, not
violative of Section 1 of the Sherman Antitrust Act, and not an
unreasonable restraint of trade at common law).
4
Legal Encyclopedias
Tying arrangements in franchise agreements. Am. Jur. 2d,
Private Franchise Contracts §§ 84 et seq.
5
Legal Encyclopedias
Defenses to illegal tying arrangement claim. Am. Jur. 2d,
Private Franchise Contracts §§ 115 to 117.

6
Legal Encyclopedias
Termination or nonrenewal of private business franchise. Am.
Jur. 2d, Private Franchise Contracts §§ 299 et seq.
7
Legal Encyclopedias
Statutory requirements of notice of termination and opportunity
to cure. Am. Jur. 2d, Private Franchise Contracts § 316.
8
For a discussion of federal tax statutes, regulations, and court
decisions concerning franchise agreements, see Federal Tax
Guide to Legal Forms §§ 10:15 et seq.
End of Document
Government Works.

§ 50:6.Form drafting guide—Checklist—Drafting franchise...,
4A Am. Jur. Legal...
worldwide.erau.edu
§ 50:6.Form drafting guide—Checklist—Drafting franchise...,
4A Am. Jur. Legal...
Government Works.
4A Am. Jur. Legal Forms 2d § 50:6
American Jurisprudence Legal Forms 2d | May 2019 Update
Chapter 50. Business Franchises
II. Basic franchise agreements
§ 50:6. Form Drafting guide— Checklist—Drafting Franchise
agreement
Summary | Correlation Table
Checklist of matters that should be considered in drafting a
franchise agreement:
• Franchisor.

— Name.
— Address.
• Franchisee.
— Name.
— Address.
• Nature and extents of rights granted to franchisee.
— Duration of franchise period.
— Exclusiveness of franchise.
— Authorized use of trademark.
• Description of franchise territory.
— Geographic boundaries.
— Demographic considerations.
• Franchisee’s form of business.
— Corporation.
— Limited Liability Company.
— Partnership.
— Sole proprietorship.
• Payment by franchisee.
— Royalty fee.
— Service fees.
— Advertising fees.
— Amount of fees returnable on termination of agreement.
• Preliminary duties of franchisor.
— Construction of business premises.
— Lease of business premises.
— Feasibility studies for market area.
— Training of franchisee.
• Continuing duties of franchisor.
— Training of new personnel.
— Providing new information.
— Guidance in business decisions.
— Product improvement.
• Duties of franchisee.
— Maintaining standard of quality.
— Business promotion.
— Maintaining competent employees.

— Attendance at regional meetings.
— Notification of franchisor of financial difficulties.
— Maintenance of trade secrets.
— Agreement not to compete with franchisor.
• Quality control.
— Operating manual.
— Franchisor’s approval of franchisee’s employees.
— Inspection by franchisor.
— Requirements as to supplies, ingredients, and equipment.
— Antitrust problems regarding extent of controls.
• Advertising.
— Promotional advertising.
— Continuing fees for advertising.
— Advertising fund.
• Assignment or other transfer of franchise by franchisee.
— Approval by franchisor.
— Time in which franchisor must approve.
— Requirements for assignees or transferees.
• Renewal of agreement.
— Notice of intent to renew.
— Renewal fee.
• Termination.
— Definition of breach or default.
— Notice of termination.
— Refunds to franchisee on termination.
— Statutory regulation of termination.
• Arbitration of disputes or other method of alternative dispute
resolution.
• Severability of contract provisions.
• Choice of law for interpretation of contract.
• Compliance with all applicable state and federal regulations
prior to execution of contract.
• Effective date of agreement.
• Date of execution of agreement.
• Signatures of parties.
Westlaw. © 2019 Thomson Reuters. No Claim to Orig. U.S.

Govt. Works.
End of Document
Government Works.

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