Franchise Agreement

A franchise agreement is an agreement wherein the franchisor agrees to lend the trade name or business system to another person or entity (the franchisee). The contract will define the basis of the arrangement between the two parties, specifying the consideration to be paid by the franchisee (partial payment is often in the form of royalties for the use of the franchisor's trademark), how the brand name can be used, the length of the arrangement, and clauses dealing with penal provisions, ranging from fines and compensation to cancellation of the franchise.