10 Clauses You Must Include in Every Franchise Agreement

A weak franchise agreement can destroy a good brand. Whether you’re a franchisor expanding internationally or a local entrepreneur entering into a franchise deal, one thing is certain: your contract must do more than just look professional—it must protect both parties.

In this post, we’ll walk you through 10 must-have clauses that every franchise agreement should include. These are the legal building blocks that define rights, responsibilities, and remedies before conflicts arise.

Who This Is For / Why This List Matters

This list is for:

• Business owners looking to franchise their concept
• Lawyers or consultants drafting or reviewing franchise agreements
• Entrepreneurs about to buy a franchise
• Legal advisors helping clients expand regionally or globally

Use this when:

• You’re finalizing a franchise deal
• You’re reviewing an agreement before signing
• You want to protect your intellectual property, revenue, and brand reputation

1. Grant of Franchise Rights

This clause defines what exactly is being licensed:

• The use of brand name and logo
• Access to proprietary systems or software
• Territory (exclusive or non-exclusive)

Why it matters: It sets the boundaries of the relationship. Without it, the franchisee might assume broader rights than you intended.

2. Fees and Payment Terms

Clearly state:

• Initial franchise fee
• Ongoing royalties (flat or percentage)
• Marketing fees or software license charges

Best practice: Include timelines, payment methods, and consequences of late payments.

3. Franchisee Obligations

Spell out what the franchisee must do:

• Daily operations standards
• Staff training requirements
• Branding and signage guidelines

Tip: Include reference to the operations manual and require regular updates.

4. Franchisor Support

Outline what support the franchisor provides:

• Initial training
• Marketing assistance
• Technology or software support

This avoids disputes where franchisees claim they didn’t get what was promised.

5. Term and Renewal

Define:

• The initial contract period (e.g., 5 years)
• Conditions for renewal
• Fees or performance standards tied to renewal

Avoid this mistake: Letting a franchisee assume they can renew automatically.

6. Termination and Exit Options

List reasons the contract can end, such as:

• Breach of agreement
• Bankruptcy or insolvency
• Repeated quality violations

Also include:

• Notice periods
• Cure periods (time allowed to fix a breach)
• Post-termination obligations (e.g., removing signage, returning materials)

7. Intellectual Property Protection

Clarify who owns:

• The brand and trademarks
• Proprietary software, systems, or manuals

Important: Prevent the franchisee from using the IP after termination.

8. Non-Compete and Non-Solicitation

Restrict the franchisee from:

• Opening a competing business within a defined area or time frame
• Hiring staff or suppliers from the brand network

Tip: Make sure the restrictions are reasonable or they may not be enforceable.

9. Dispute Resolution

Include:

• Preferred jurisdiction and governing law
• Mediation or arbitration requirements
• Courts with exclusive authority

Legal note: If franchising across borders, choose a neutral venue that both parties can accept.

10. Force Majeure and Unexpected Events

This clause protects both parties if something outside their control happens:

• Natural disasters
• Political unrest
• Global pandemics

Include:

• What obligations are suspended
• Whether payments are paused
• How long before termination can occur due to force majeure

Mini Case Example: Preventing Brand Dilution in a GCC Expansion

A Middle Eastern coffee chain signed its first UAE franchise deal. The agreement didn’t include strict quality control or an IP clause. The franchisee changed packaging and introduced unauthorized menu items.

The franchisor couldn’t legally stop it without causing a dispute.

When renegotiating, they included clauses on IP usage, brand guidelines, and default consequences. The contract was enforced under UAE law with stricter protection, and future franchisees followed suit.

Quick Reference Checklist

Final Thoughts + Call-to-Action

Franchising can fuel massive growth, but only when the agreement is tight, clear, and fair. The right clauses act as your legal firewall—protecting your brand, revenue, and relationships.

Before you sign or offer any franchise deal, review these 10 essential clauses carefully—or better yet, book a legal consultation .