Guide
Franchise Agreement Questionnaire
MAKING BUSINESS
CONTRACTS
FRANCHISE
AGREEMENT QUESTIONNAIRE
One popular way to
get started in your own business is through a franchise. A franchise is 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. Fast food restaurants are commonly
operated as franchises. Before you enter
into a franchise agreement, consider the following questions, and go over your
responses with your attorney.
COST OF THE FRANCHISE
How much is the
initial franchise fee?
$_____________
Refundable ___
Nonrefundable _____
What does the
initial fee purchase?
__________________________________________
_______________________________________________________________________
Is a lump-sum
payment required? Yes ___
No ___
Are installment
payments allowed? Yes ___
No ___ How many?
___________
Payment due
dates
__________________________________________________
Is franchisor
financing available? Yes ___
No ___ Interest rate _____________
Are periodic
royalty payments required? Yes ___
No ___
How often?
________________________________________________________
How are they
calculated?
__________________________________________________
_____________________________________________________________________________
Does the franchisor
provide accounting services? Yes ___
No ___
For an
additional fee? Yes ___
No ___ How much?
$_________
How are advertising
costs divided between the franchisor and franchisee? ____________
_____________________________________________________________________________
Is
advertising national, regional, or local?
_______________________________
What other services
does the franchisor provide?
_______________________________
_______________________________________________________________________________
How is the franchise
premises obtained? Purchase ___
Lease ___
Is financing
available from the franchisor for the purchase of the premises?
Yes ___
No ___
Interest rate _________
How much of a down
payment is required? $_____________
How much are the
rent payments? $_____________ Due on _______________
FRANCHISE LOCATION
What geographic
area is encompassed by the franchise?
__________________________
How far away
is the nearest existing franchisee of the same franchisor? _____________
Are other franchises planned for the same geographic
area in the future?
Yes ___
No ___
If so, provide details
______________________________________________________
________________________________________________________________________
Who selects the site for the franchise? Franchisor
___ Franchisee ___
Can the franchisee use his or her own property for
the franchise? Yes ___
No ___
If the franchise premises require new construction,
who determines the plans and specifications for the building? Franchisor
___ Franchisee ___
Who supervises construction and works with the
contractor and subcontractors?
Franchisor ___ Franchisee
___
What are the specifications for and restrictions on
the appearance and configuration of the premises? _____________________________________________________________________
___________________________________________________________________________________
Who provides property insurance on the premises? Franchisor
___ Franchisee ___
What are the franchisee’s responsibilities relating
to remodeling? __________________
__________________________________________________________________________________
What restrictions
does the franchisor place on remodeling? ________________________
_________________________________________________________________________________
OPERATING TERMS
Must all equipment and supplies be purchased from the
franchisor? Yes ___
No ___
If not, must purchases be approved by the
franchisor? Yes ___
No ___
How much control
does the franchisor maintain over day-to-day operations? _________
__________________________________________________________________________________
What aspects of the
business are left to the discretion of the franchisee? _____________
___________________________________________________________________________________
Are hours and days
of operation dictated by the franchisor?
Yes ___ No ___
Are products and
services strictly controlled by the franchisor?
Yes ___ No ___
Must the franchisee
remain personally involved in running the franchise, or can the management
duties be delegated?
____________________________________________
ADDITIONAL CONSIDERATIONS
Does the franchisor
provide initial training? Yes ___
No ___
Does the franchisor
provide on-going training? Yes ___
No ___
Under what
conditions may the franchisor terminate the franchise? _________________
______________________________________________________________________________________
What are the
franchisor’s duties and obligations to the franchisee in the event of such termination?
________________________________________________________________________
_______________________________________________________________________________________
Under what
conditions must the franchise be renewed?
___________________________
_________________________________________________________________________________________
What happens to the
franchisee’s interest if he or she dies?
________________________
__________________________________________________________________________________________
Is the franchise
assignable? Yes ___
No ___
How long has the
franchisor been in business? ___ years
How many total
franchises are there? ________
Are these
franchises financially successful?
Yes ___ No ___
How long did it take them to become
profitable? _______________
Has the franchisor
complied with all applicable state and federal laws and regulations?
Yes ___
No ___
Other questions to
ask my attorney:
__________________________________________
_________________________________________________________________________________