Franchise Agreement

In: Business and Management

Submitted By libby9876
Words 1396
Pages 6
When endeavouring on a new business adventure, franchise agreements certainly have some appealing aspects to them, however there are many disadvantages to also consider before signing your business away. I was able to analyze an actual franchise agreement between Mackenzie’s Big Boy Inc. and Elisa Brothers Restaurants, Inc. to explore some of these negative terms and will consider this contract a standard template in franchise agreements.
A predominate disadvantage is obviously the monthly percentage in sales you will be losing in paying royalty fees. In our example, Big Boy Corporation royalty fees are 5% of gross sales; to put that in better perspective our Big Boy paid just over $45,000 in royalties this past year. Gross sales are a total of all profits, even including vending/gumball machines or on sale items.
In signing a franchisee agreement, you are agreeing to actively partake in “Modifications in Systems” or agreeing that the franchisor may change or modify franchisors systems at any time for any reason and you will comply. In our Big Boy franchise example it stats that this agreement includes, but is not limited to ”the adoption and use of new or modified trade names, trademarks, service marks, or copyrighted materials and modifications of the menu or required equipment as if they were a part of the original agreement.” Basically, you’re accepting someone knocking at the door of your business and telling you what you’ll change, when you’ll change it, and how. This can be nice when cooperate comes up with a great new idea, however you’ll start to find that many popular items customers have learned to rely on will be discontinued, and some extremely questionable items will arrive. I have heard of this happening in many franchise situations and can detour many regular customers. In the agreement, you also coincide to purchase all produce from verified…...

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