A common franchise agreement will allow a franchisee permission to use the business model, trade names and other intellectual property and reputation of the franchisor's business in return for a specified payment.
As it is the reputation and success of a proven business model that is key to the relationship, the franchisor will usually be granted a degree of control over the running of the franchisee's business to ensure that it is obliging by the business model and not continuing in a way that may harm the reputation of the business. In return, the franchisor will often have duties to assist the franchisee in running the business.
Other clauses should deal with employees, the licensing of intellectual property, which assets belong to the franchisee or franchisor and the confidentiality of the trade secrets of the franchisor.
The franchise agreement should also cover the procedure should a franchisee wish to stop being a franchisee, for instance, whether the business can be sold as part of the franchise and whether the franchisee can operate a competing business elsewhere.
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