The franchise agreement
Once you have found the concept that suits you, it is time to enter into an agreement with the franchisor. There is no standard franchise agreement, so agreements can vary depending on the franchise chain.
The franchise agreement
All agreements are individual, but should clearly set out the rights and obligations of both parties. It is important that you read the agreement carefully and understand what it means. A lawyer who is knowledgeable about franchising can help you decide whether the terms of the agreement are reasonable.
The Swedish Franchise Association has drawn up a checklist of the points that a franchise agreement should contain, such as:
- the parties to the agreement and the purpose of the agreement
- the rights of the franchisee and in what areas
- the franchisor's obligations
- the franchisee's obligations
- undertakings (including loyalty, confidentiality and non-compete)
- confidential information/trade secrets
- marketing
- finance and administration
- fees
- term of the agreement
- dispute resolution.
More advice and tips on franchising from the Swedish Franchise Association (in Swedish)
Franchisor's duty to inform
The franchisor is obliged to provide you, the franchisee, with comprehensible information in writing about the content of the agreement and any other facts that are important in the circumstances, well in advance of the conclusion of a franchise agreement.
If you cannot reach an agreement
At the beginning of a partnership, you do not usually think about what might happen if you later fail to reach an agreement with the other party. It is therefore important that the franchise agreement clearly sets out how any future dispute will be resolved.
As a franchisee, you should be clear about the meaning of different ways of resolving a dispute, as the franchisee is often in a weaker financial position than the franchisor.
The alternatives are to take the dispute to court or to settle it through arbitration or through simplified arbitration.
If you want to close down or sell your business
Think about what might happen if you want to close your business for any reason. A franchise agreement runs for a specified period of time. The conditions for terminating and renewing the agreement must be set out in the agreement. If you want to sell your business, remember that the franchisor has the right to assess the suitability of the buyer as a new franchisee in your place. The franchisor may object to a sale to a particular person. Read the contractual terms for the sale of the business carefully, so that you know what applies from the outset.