What is the meaning / definition of Agreement in the industry?

The agreement is the legal contract that binds a franchisor and in business.

The agreement is a contract that generally consists of terms and clauses that specify as to how a business (franchisor) agrees to provide another party (franchisee) with the company’s brand, services, operation methods and any other support to operate a similar business in exchange for a initial payment as well as a percentage of the generated income in form of a monthly re-occurring fee (royalty fee).

A franchise agreement is normally negotiable, and can range in durations of a year to even undetermined amount of years. Most common example of a franchisor is McDonalds, as the world’s largest franchise network. In the hotel industry franchises are very common as they allow to benefit from the power of greater brands or companies. Thereby allowing them a greater reach far beyond anything their own resources could buy. Additionally to this the from advice, SOPs, simple business financing, support and security and overall less likely to fail. On the other hand, being a franchisor means loosing control over many aspects of your own company.

See also:

  • Hotel Franchise
  • Franchisor
  • Franchise fee
  • Royalty Fee
  • Franchise Disclosure Document


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