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Aspects of a Franchise Agreement - Part three - Franchisor obligations

posted 1 year ago

The franchise agreement sets out the obligations of the franchisor towards the franchisee during the term of the agreement such as:

Good faith

Good faith is a reciprocal obligation and just as the franchisee must act in good faith with the franchisor, the franchisor must also act in good faith with the franchisee. All franchise agreements should include an obligation on the franchisor to act in good faith towards the franchisee.

Provide advice to the franchisee

The Franchisor must provide marketing and management advice as well as general advice regarding operating the business.  

Promote the brand

The Franchisor conducts national marketing programmes for the brand such as national campaigns. The franchisor must also provide the franchisee with guidance regarding the marketing programme and the obligations of the franchisee in regard to any network wide competitions.

Promoting great relations between franchisees

The Franchisor must foster good relations between the franchisees and the network and should never favour any franchisee over the other. The network on a whole is much stronger when everyone works together.

Training and consultation

When the franchisee initially signs the franchise agreement, it will go through the training as required by the franchisor to operate the business. During the term of the agreement and any renewal period, it must also provide additional training and consultation to the franchisee in relation to an aspect of the business. Usually, franchise agreements allow for the franchisor to charge an additional training fee for providing additional training.

In conclusion, the franchisor must be available to assist the franchisee during the term of the franchise agreement. Be wary of franchisors that appoint a franchisee and then leave the franchisee to its own devices. This will impact the brand as the franchisor will not be informed of how the franchisee is operating the business and if it is in accordance with the terms of the franchise agreement.

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