| wing on from Part 1 we are going to discuss | | | | to do so by the franchisor. |
| understanding section 2, your franchise or license | | | | •To maintain the widest possible insurance |
| agreement. | | | | coverage. |
| Franchise or License Agreement | | | | •To permit the franchisor's staff to enter the |
| 1. The rights granted to the franchisee. The | | | | premises to inspect and see if the franchisor's |
| franchisee will be given the right as it applies to | | | | standards are being maintained. |
| particular circumstances. As a franchisee there are | | | | •To purchase goods or products from the |
| certain rights that are extended to you. | | | | franchisor or his designated suppliers. |
| Your rights include: | | | | •To train your staff in the franchisor's |
| •Use of trademarks, trade names and | | | | methods to ensure that they are neatly and |
| patents of the franchisor. | | | | appropriately clothed. |
| •Use of the brand image and the design and | | | | •Not to assign the franchise contract without |
| décor of the premises developed by the | | | | the franchisor's consent. |
| franchisor. | | | | 4. Trade restrictions. The restrictions imposed upon a |
| •Use of the franchisor's secret methods. | | | | franchisee may prohibit him or her from carrying on a |
| •Use of the franchisor's copyright materials. | | | | similar business except under franchise from the |
| •Use of recipes, formulae, specifications and | | | | franchisor, taking staff away from other franchisees, |
| processes and methods of manufacture developed | | | | carrying on a similar business in close proximity to |
| by the franchisor. | | | | other franchised businesses within that chain, and |
| •Conducting the franchised business upon or | | | | continuing, after termination of the franchise |
| from the agreed premises strictly in accordance with | | | | contract, to use any of the franchisor's trade names, |
| the franchisor's methods and subject to the | | | | secrets, and so forth. |
| franchisor's directions. | | | | 5. Assignment/death of the franchisee. The |
| •Guidelines established by the franchisor | | | | franchisee should ensure that in the event of death |
| regarding exclusive territorial rights. | | | | his/her personal representative or dependent will be |
| •Rights to obtain suppliers from nominated | | | | able to keep the business going until one of them can |
| suppliers at special prices. | | | | qualify as a franchisee, and that arrangements can be |
| 2. The obligation undertaken by the franchisor. This | | | | made to keep the business going until a suitable |
| item in the contract tells prospective franchisees | | | | assignee can be found at a proper price. |
| what the franchisor will do for them both before and | | | | 6. Termination provisions. The termination of a |
| after start-up. That is why this item frequently refers | | | | franchise is an event heavily regulated by the |
| to specific contractual obligations detailed in the | | | | franchise laws of 17 states. Franchise relationship laws |
| franchise agreement, which is attached to the UFOC. | | | | in many states specify the conditions under which a |
| 3. The obligations imposed upon the franchisee. | | | | franchisor may terminate or refuse to renew the |
| Certain obligations are required of you by the | | | | franchise, imposing a standard of "good cause," |
| franchisor. These obligations include: | | | | "reasonable cause" or "just cause" as defined by |
| •To carry on the business franchised and no | | | | those laws. Minimum advance notice usually has an |
| other business upon the approved and nominated | | | | opportunity to cure the default and avoid |
| premises. | | | | terminations; notice ranges from five days to 90 |
| •To observe certain minimum operating hours. | | | | days. Many states also specify circumstances under |
| •To pay a franchise fee. | | | | which the standard notice and cure requirements |
| •To follow the accounting system laid down | | | | need not be met. |
| by the franchisor. | | | | In view of the close working relationship that must |
| •Not to advertise without prior approval of | | | | exist between the franchisee and franchisor all |
| the advertisements by the franchisor. | | | | provisions must be stated clearly in the contract. In |
| •To use and display such point of sale | | | | this transaction, no small print should exist. Make sure, |
| advertising materials as the franchisor stipulates. | | | | if possible, the franchise contract contains provisions |
| •To maintain the premises in good, clean and | | | | that are favorable for both you and the franchisor. |
| sanitary condition and to redecorate when required | | | | |