5 Things to Understand Before Signing a Franchising Agreement
Franchising can be a great way to start your own business with the support and guidance of a well-established brand. However, it is important to carefully consider all of the terms and conditions of the franchising agreement before signing on the dotted line. Here are 5 things to understand before signing a franchising agreement for local or Philippine franchises:
1. The franchise fee and ongoing royalties:
The franchise fee is the initial upfront payment that you make to the franchisor to acquire the franchise rights.
Ongoing royalties are typically a percentage of your sales that you pay to the franchisor on a regular basis. It is important to understand these financial obligations and how they will impact your profitability.
2. The franchise territory:
The franchise territory is the geographic area in which you are granted the exclusive right to operate the franchise.
The size and exclusivity of the territory can have a significant impact on your business potential. Be sure to carefully review the franchise agreement to understand the scope of your territory and any restrictions on your ability to expand or relocate.
3. The franchisor’s obligations:
The franchisor is obligated to provide you with certain support and resources to help you succeed in your business.
These obligations may include training, marketing assistance, and operational support. Be sure to understand what support the franchisor will provide and how they will measure your performance.
4. Your obligations as a franchisee:
The franchisor requires franchisees to comply with its operating system and standards.
This may include following specific procedures for product preparation, customer service, and marketing.
The franchisor requires franchisees to understand their obligations and strictly follow the franchisor’s system.
5. The termination clause:
The termination clause in the franchising agreement outlines the grounds on which the franchisor can terminate the franchise agreement.
It is important to understand these grounds and any financial penalties that may apply in the event of termination.
