FRANCHISOR CHECKLIST
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1. What obligations will you take on: • Assistance in standard form contracts to be used • Contacts for suppliers? Volume discounts etc. • Will you supply anything? • Any managerial assistance — eg. bookkeeping methods, manuals for the business, • Promotional /advertising programs • Contacts in the market place • Training • Personnel, hiring etc. • Any financial assistance? — loans etc. 2. What obligations will you require Franchisee to undertake? • What identifying colors, designs, tradenames, marks, logos, signage are you currently using and which you want to require Franchisee to use? • What specifications regarding clothing, truck signage, tools, etc. • What are payments based on? Eg. Royalty for right to use name, methods? Goodwill? What are you licensing to Franchisee in return for payments? • Availability of books and financial information to you for inspection • Submission of periodic financial statements? • Required participation in advertising promotions, discounts, sales, etc. • What policies do you require franchisee to follow? • How much time is required of franchisee to devote to the business? • What insurance, corporate structure etc. is required? • Any limitations on where franchisor can purchase supplies? 3. What is the method of payment? • Initial lump sum? • % of contract referrals? • Royalty for tradenames etc. • Monthly consulting or management fee to you as franchisor • Payments re proportionate share of advertising programs etc. • How are these payments calculated?
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4. Non-Competition? • Franchisor commitments to support franchisee in geographical area, eg. not to grant another franchise for south of Queen Street East? Not to undertake contracts itself in that territory etc. • Franchisee agrees to refrain from similar business during the term and for time after term of franchise agreement • Protection of confidential information • Agreement not to interfere with or solicit employees of the other etc. 5. Termination of Franchise. • What is the length of the term? • Any minimum income required to keep the franchise, i.e. minimum royalties to franchisor etc.? • Default for failing to meet quality standards? Not to correct upon notice from franchisor? • What happens on death/bankruptcy of franchisor? Franchisee? • If supplies are purchased or arranged by you as franchisor, any requirement to take back on termination? Any commitment to take over premises, equipment, employees etc. (*Avoid if possible). 6. Sale or Transfer of Franchise? • On consent of Franchisor only? • Guarantees for performance? By individual shareholders of franchisee corporation? 7. General Matters. • Both are independent contractors, not agents • Indemnity for Franchisor against acts of Franchisee etc. • Requirement that contracts require disclaimer etc. • Arbitration/Mediation clause re disputes • Notice periods and addresses etc.
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