What's a Franchise Agreement?
The franchise agreement (FA) is the actual contract and explanation of terms and conditions 'agreed' to between a franchisor and a franchisee.
When the franchise purchase and sales process reaches the point at which the prospective buyer is financially qualified (and hopefully qualified in terms of skill sets as well), the franchisor will provide 'disclosure documents' to the prospect. Those disclosure documents will consist of primarily two items. The first is the UFOC (the offering circular which will soon be replaced by the FDD – franchise disclosure document), and the Franchise Agreement (the FA). The offering circular is a regimented disclosure of the business being franchised (costs, terms, fees, etc.), as well as a disclosure of information about the company doing the franchising and the key management/ownership personnel operating it. It is your franchise due diligence information, or at least the starting point.
The FA is a second document which spells out the contractual relationship between franchisor and franchisee. This may surprise you, but most franchisees have no idea what they have signed via the franchise agreement, and that is why I 'strongly encourage' the use of a qualified person to help in the franchise due diligence process.
