The Franchise Disclosure Document is a 23-item document required by the FTC Franchise Rule (16 C.F.R. Part 436). It must be provided at least 14 days before signing or payment.

Do all states require franchise registration?

No. About 15 states require registration or filing (CA, IL, MD, MN, NY, etc.). Others rely solely on the FTC Rule.

Can the franchisor terminate at will?

Many state franchise relationship laws restrict termination and require good cause and cure periods. Check state-specific protections.

Are non-compete clauses enforceable?

During the term, generally yes. Post-term, enforceability varies by state. California broadly prohibits them (B&P Code §16600).

What about earnings claims?

FDD Item 19 allows (but doesn't require) financial performance representations. If made, they must have a reasonable basis.

Is this template legally binding?

Yes, when executed with proper FDD disclosure and in compliance with applicable state law.

Can this document be signed electronically in the United States?

Yes, electronic signatures are legally valid under the E-SIGN Act (15 U.S.C. 7001) and the Uniform Electronic Transactions Act (UETA) adopted by most states.

What happens if this document is breached in the United States?

The non-breaching party may seek remedies including compensatory damages, specific performance, injunctive relief, or termination. Remedies vary by state law.

Does this document need to be notarized in the United States?

Notarization requirements depend on the document type and state law. While not always required, notarization adds authentication and may be necessary for government filing.

Franchise Agreement

This Franchise Agreement (hereinafter referred to as the "Agreement") is entered into on [Effective Date](the "Effective Date") by and between

, an individual having their usual place of living at [Address](hereinafter referred to as the "Franchisor"), and

, an individual having their usual place of living at [Address](hereinafter referred to as the "Franchisee"), collectively referred to as the "Parties" and individually as the "Party".

WHEREAS the Franchisor has developed a successful business model and desires to scale its business activity based on a franchise model;

WHEREAS the Franchisee aims to establish, develop, and operate its business based on a Franchisor's business model upon the terms and conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and upon other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties have agreed as follows:

Subject of the Agreement

Franchisor's business. [Business description](the "Business").

Type and name of the franchise. The Franchisor hereby grants to the Franchisee, and the Franchisee undertakes and accepts, upon the terms and conditions set forth herein, a revocable, limited, exclusive license to open and operate [Name](the "Franchise") on the approved location described below.

The Franchisor has no right to operate, license, and grant franchises for similar or identical businesses to the third parties.

Purpose of the Franchise. The Franchise may be used only for the following purpose: [Purpose].

The Franchisee shall not use the franchised location for any purpose other than the operation of the Franchise under the terms and conditions of this Agreement unless otherwise agreed with the Franchisor in writing.

Scope of the Franchise. The Franchisee shall diligently and faithfully operate all aspects of the Franchise, adhering to methods and systems developed and prescribed by the Franchisor. The Franchisee shall make every effort to promote the Franchise.

Franchised location. The Franchisee shall establish and operate as a franchised location (the "Franchised Location") at the following address: [Address], [City], [State] [ZIP Code]. Purpose: [Purpose].

Conversion and design. The Franchisee acknowledges that the design, decoration, and color scheme are crucial elements of the Franchise. The Franchisee shall convert, design, and decorate the Franchised Location following the Franchisor's corporate style mentioned in the operational manual, as defined herein.

Operational manual, quality control, and inspections

The Franchisor shall provide the Franchisee with manuals, descriptions, technical guidelines, requirements, standards, specifications, and other materials (the "Operational Manual") that cover all aspects of the Franchise implementation. The Operational Manual shall be provided in the Annex that makes an integral part of the Agreement.

Franchisee's rights and obligations

The Franchisee is entitled to the following rights under this Agreement:

Receive all materials, guidelines, instructions, and other information essential for the successful execution of this Agreement;
Get the necessary assistance and support from the Franchisor for the successful execution of this Agreement.

The Franchisee has the following obligations, including but not limited to:

Operate the Franchise in accordance with the Operational Manual, the terms and conditions of this Agreement, and all applicable laws and regulations;
Refrain from advertising or using the logo, name, and trademarks of the Franchisor in advertising or any other form of promotion without the appropriate trademarks and copyright consent or license.

Permits and licenses

Either Party shall obtain and maintain all necessary permits, certifications, and licenses required for the lawful construction and operation of the Franchise. These include but are not limited to health and safety permits, building and other construction permits, business licenses, and sales tax permits.

The Franchisee shall obtain and maintain in full force and effect: Comprehensive general liability insurance with a minimum limit of [General insurance amount]. Automobile liability insurance covering all employees of the Franchised Location with authorization to operate a motor vehicle, with a minimum amount of [Automobile insurance amount]. Unemployment and worker's compensation insurance.

Intellectual property

The Franchisor owns the following intellectual property: [Intellectual Property Objects](the "Intellectual Property Objects").

The Franchisee has the following right(s) related to the Intellectual Property Objects used during the course of carrying on the Franchise: the Intellectual Property Objects solely for the purposes of this Agreement.

The Franchisor retains ownership and reserves all rights, title, interest, and copyright of the Intellectual Property Objects.

The Parties acknowledge that the Franchisor retains all rights not explicitly granted to the Franchisee under this Agreement.

The Franchisee guarantees not to use or register the Intellectual Property Objects and any similar designations or objects alone or as part of the Franchisee's intellectual property anywhere in the world. The Franchisor shall maintain the validity and enforceability of the Intellectual Property Objects, including the timely filing of any necessary renewals. The Franchisee is permitted to use the Intellectual Property Objects only during the valid term of this Franchise.

Franchise registration

The Franchisor shall be responsible for preparing and filing the necessary Franchise disclosure documents in accordance with applicable legal requirements. The Franchisor shall cover all costs related to the preparation, filing, and maintenance of Franchise registration documents and fees unless stated otherwise in this Agreement.

Supply and equipment

The Franchisee shall purchase or otherwise obtain the equipment for use at the Franchised Location and in connection with the Franchise in accordance with the specifications outlined in the Operational Manual. The Franchisor shall provide the Franchisee with an approved suppliers list authorized by the Franchisor for the procurement of ingredients, products, supplies, and materials required to operate the Franchised Location.

Training and assistance The Franchisor shall perform mandatory and optional training programs to assist the Franchisee in meeting the requirements for recruiting and training the staff as specified in the Operational Manual.

Payment terms

The Franchisee agrees to make payments to Franchisor as outlined in this Agreement. The total amount of all payments shall constitute the price of the Franchise.

Initial fee. The Franchisee agrees to pay the Franchisor an initial fee of [Initial fee] within [Number of days] days from the Effective Date.

Late payment. If the Franchisee fails to make any payment by the specified due date, the Franchisor shall have the right to charge interest on the overdue amount at a rate of [Late fee percentage]% [Late Fee] or the maximum rate allowed by law, whichever is less.

Term and termination

This Agreement shall commence as of the Effective Date and shall be valid for [Term Agreement]. The Agreement may be extended upon prior mutual written consent of the Parties.

Either Party may terminate this Agreement without cause upon providing the other Party with [Termination notice in days] days prior written notice. This Agreement may be terminated for cause if either Party breaches the terms of this Agreement (the "Default"). In the event of the Default by either Party, the non-breaching Party shall have the right to provide another Party with appropriate written notice (the "Default Notice") with a demand to cure the Default within [Number of days] days from the date of receiving the notice. If the breaching Party fails to meet the requirements stated in the Default Notice within a specified term, a non-breaching Party shall be entitled to terminate the Agreement unilaterally as of the term specified in the Default Notice.

The Franchisee must cease operating the Franchise, discontinue the use of all Intellectual Property Objects, and return all originals and copies of the Operational Manual.

Upon termination of this Agreement, the Franchisee shall pay the Franchisor all outstanding payments that have become due by the Date of Termination.

The Royalties should be paid on a pro rata basis as of the Due Date.

Upon the Franchisee's death, incapacity, or bankruptcy, the Agreement shall be automatically terminated within [Number of days] days from the date of death, incapacity acknowledgment, becoming insolvent or filing for bankruptcy unless otherwise provided by the governing law.

Taxes. Either Party is solely responsible for complying with all applicable tax laws, regulations, and reporting requirements related to the payments under this Agreement.

Assignment of rights. The Franchisee has the right to assign, convey, and transfer all rights, title, interest, and obligations under this Agreement to the third party.

The Franchisee shall not assign or transfer such rights and obligations to any third party without obtaining prior written consent from the Franchisor.

Liability and indemnification

The Franchisee shall be liable for any damages caused to the Franchisor due to negligence or willful misconduct of the Franchisee or any person associated with the Franchisee. The limitation of liability shall apply to the maximum extent permitted by applicable law, covering any damages or liabilities incurred by any cause.

The Franchisee shall indemnify and hold the Franchisor harmless from any demands, claims, damages, or expenses, including reasonable attorney's fees, resulting from the use of the Franchise, except those resulting from the Franchisor's negligence or misconduct. However, if it is found that both the Franchisee and the Franchisor contribute to the claim through fault or negligence, the Franchisor's indemnification obligation shall be reduced by the percentage of fault assigned to the Franchisee.

Notices

All notices required or allowed under this Agreement shall be delivered personally or via certified mail to the address or emails set forth on the signatory page. Either Party may change its registered mail or email address for receipt of notices by giving written notice to the other Party.

Force majeure [Initial fee] Neither Party shall be liable for any failure to perform or delay in performing the obligations under this Agreement if such failure or delay is caused by events of force majeure, including but not limited to acts of God, war, terrorism, strikes, lockouts, labor disputes, pandemics, epidemics, governmental regulations, or any other similar causes beyond the reasonable control of the affected Party. In the case of force majeure, the affected Party shall immediately notify the other Party in writing and provide reasonable proof of the cause of the delay or inability to perform the obligations. The Party affected by force majeure shall endeavor to mitigate the consequences of such circumstances and resume the performance of obligations as soon as possible after the circumstances cease to exist. If the force majeure circumstances last more than [Number of days] days, either Party may terminate this Agreement by giving written notice to the other Party. In this case, neither Party shall be liable to the other Party for any damages arising from the termination of this Agreement.

Confidentiality

The Parties shall enter into a separate non-disclosing agreement to protect confidential information related to this Agreement.

Governing law and dispute resolution

This Agreement shall be governed by and interpreted in accordance with the laws of the State of [Governing law], and any disputes resulting from or related to this Agreement that cannot be resolved by mutual negotiations shall be exclusively resolved by the courts of the State of [Governing law].

Miscellaneous

Severability. If any provision of this Agreement is invalid or unenforceable, the remaining provisions shall still be valid and enforceable.

Entire agreement. This Agreement and Annexes shall make the entire understanding between the Parties concerning the subject matter hereof superseding any prior agreements and communications, both written and oral, regarding such subject matter.

Waiver. The failure of any Party to enforce a particular provision of this Agreement shall not constitute a waiver of their right to enforce that provision in the future.

Amendments. This Agreement may only be modified, or any rights under it waived, by a written document executed by both Parties.

Binding effect. This Agreement shall be binding and inure to the benefit of the Parties and their respective permitted successors and assigns.

Annexes. All Annexes and exhibits make an integral part of this Agreement.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the Effective Date.

Details and signatures of the Parties

THE FRANCHISOR [Franchisor's name] Address: [Address], [City], [State] [ZIP Code] _____________________ (Place for signature) THE FRANCHISEE [Franchisee's name] Address: [Address], [City], [State] [ZIP Code] _____________________ (Place for signature)

Party 1

________________

Signature

Date: ________________

Party 2

________________

Signature

Date: ________________

Maintained by Vladislav Sergienko, Founder·Template last modified: 2026-06-23·Report an error

What Is a Franchise Agreement?

A Franchise Agreement in the United States is a legally binding contract between a franchisor (the brand owner) and a franchisee (the independent operator) that grants the franchisee the right to operate a business under the franchisor's trademark, business system, and operational methods. Regulated at the federal level by the FTC Franchise Rule (16 CFR Part 436) and at the state level by franchise-specific statutes in approximately 15 registration states — including California, New York, Illinois, and Minnesota — the franchise agreement defines the entire commercial relationship between the parties.

The FTC Franchise Rule requires franchisors to provide a Franchise Disclosure Document (FDD) containing 23 specific items of disclosure at least 14 calendar days before the franchisee signs any binding agreement or pays any money. Item 22 of the FDD contains the actual franchise agreement, which constitutes the operative legal document governing day-to-day operations, fee structures, territorial boundaries, and the term of the relationship. The Federal Trade Commission enforces the Franchise Rule through civil investigative demands and can impose penalties of up to $50,120 per violation under the FTC Act (15 U.S.C. Section 45).

Franchise agreements are distinct from standard business contracts because they involve the licensing of intellectual property — trademarks registered with the United States Patent and Trademark Office (USPTO), trade dress, and proprietary systems — ongoing operational control by the franchisor, and a continuing royalty payment obligation. State franchise relationship laws in jurisdictions like California (Business and Professions Code Section 20000), Wisconsin (Chapter 553), Iowa (Chapter 523H), and New Jersey (Franchise Practices Act) provide additional protections to franchisees, including restrictions on termination without good cause and requirements for reasonable cure periods before termination.

The distinction between a franchise and other business arrangements rests on the FTC's three-part definitional test: the franchisor licenses its trademark, the franchisor exercises significant operational control or provides significant assistance, and the franchisee pays a required fee of $615 or more (adjusted periodically for inflation) within the first six months. Businesses that meet all three elements are subject to the full range of FTC and state franchise regulations, regardless of how the parties label their relationship. Prospective franchisees considering a Distribution Agreement or an Agency Agreement should verify whether the arrangement triggers franchise classification under this test.

When Do You Need a Franchise Agreement?

A Franchise Agreement is required in the United States whenever a business relationship meets the FTC's three-part definition of a franchise under 16 CFR Part 436. The most common scenario involves an entrepreneur purchasing the right to open a new franchise location under an established brand — covering traditional brick-and-mortar concepts like restaurants, retail stores, and fitness centers, as well as service-based franchises in cleaning, tutoring, home repair, and healthcare staffing.

When an existing franchise agreement reaches the end of its initial term (commonly 10 years), both parties must negotiate and execute a renewal agreement. State franchise relationship laws in California, Minnesota, Iowa, and approximately 17 other states restrict the franchisor's ability to refuse renewal without demonstrating good cause, giving franchisees additional leverage during renewal negotiations. The renewal may require the franchisee to sign the then-current form of franchise agreement, renovate the franchise location to current brand standards, and pay a renewal fee.

Transferring or selling an existing franchise to a new owner triggers the need for a new franchise agreement between the franchisor and the incoming franchisee. Most franchise agreements require the franchisor's prior written consent before any transfer, and the FTC Franchise Rule requires delivery of an updated FDD to the prospective transferee. State laws in New York, New Jersey, and other jurisdictions limit the franchisor's right to unreasonably withhold transfer consent.

Area development agreements and multi-unit franchise arrangements require specialized franchise agreements that grant the developer the right — and often the obligation — to open a specified number of franchise units within a defined territory and timeline. Master franchise agreements, used for international expansion, grant a sub-franchisor the right to sell individual franchises within a designated region.

Operating a franchise without a properly executed agreement exposes both parties to significant legal risk. The franchisee lacks documented territorial protections, renewal rights, and dispute resolution procedures. The franchisor risks losing trademark rights through uncontrolled licensing under the Lanham Act (15 U.S.C. Section 1055). State registration laws may impose penalties on franchisors who sell franchises without proper registration and disclosure, including rescission rights for the franchisee and civil fines exceeding $25,000 per violation.

What to Include in Your Franchise Agreement

A United States Franchise Agreement must define the franchise grant — specifying the exact trademark registered with the USPTO, trade name, and business system being licensed, along with any approved variations for marketing materials, signage, and digital platforms. The territory clause should clearly delineate whether the franchisee receives an exclusive, protected, or non-exclusive territory, and define the geographic boundaries using specific addresses, zip codes, county lines, or radius measurements. The FTC requires disclosure of territorial restrictions in Item 12 of the FDD.

The financial terms must detail the initial franchise fee (which can range from $10,000 to $100,000+ depending on the brand and must be disclosed in Item 5 of the FDD), the ongoing royalty rate (typically 4-8% of gross sales, disclosed in Item 6), advertising fund contributions (commonly 1-3% of gross sales), and any technology fees, transfer fees, or renewal fees. Payment terms should specify due dates, acceptable payment methods, late payment penalties, and the franchisor's audit rights to verify reported sales figures. The forms-legal.com Franchise Agreement template addresses all mandatory FDD-related financial disclosures and standard royalty calculation methods.

Operational requirements represent the core of the franchise relationship under United States law. The agreement should address required initial training programs (typically 2-6 weeks), ongoing operational standards and quality controls, approved supplier lists, required business hours, minimum staffing levels, insurance minimums (commonly $1-2 million in general liability), record-keeping obligations, and the franchisor's right to conduct on-site inspections. The intellectual property section must establish the franchisee's limited right to use the trademark under the Lanham Act, restrictions on modifications, and the obligation to cease all trademark use within 30 days of termination.

Termination and renewal provisions are among the most critical clauses in any franchise agreement. The agreement should specify the initial term (commonly 10-20 years), conditions for renewal, grounds for termination by either party, required cure periods before termination for curable defaults (typically 30-60 days), post-termination obligations (including de-identification, non-compete covenants limited to 2 years and the former territory, and return of all proprietary materials), and the franchisee's transfer rights. State franchise relationship laws in California (Business and Professions Code Section 20020), Iowa (Chapter 523H), and New Jersey (Franchise Practices Act) impose mandatory notice periods and restrict termination without good cause. A dispute resolution clause — often requiring mediation through the American Arbitration Association before arbitration — a governing law provision, and a venue selection clause (commonly the franchisor's home state) complete the essential framework. Parties seeking additional protections may also consider an accompanying Consulting Agreement or a Distribution Agreement for related product supply arrangements.

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Reference this free template in an article, syllabus, or research note:

APA

Forms Legal. (2026). Franchise Agreement (United States) [Legal document template]. Forms Legal. https://forms-legal.com/usa/business/contracts/franchise-agreement

MLA

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BibTeX

@misc{formslegal-franchise-agreement,
  author       = {{Forms Legal}},
  title        = {Franchise Agreement (United States)},
  year         = {2026},
  howpublished = {\url{https://forms-legal.com/usa/business/contracts/franchise-agreement}},
  note         = {Free legal document template. Based on FTC Franchise Rule (16 CFR Part 436)}
}

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Frequently Asked Questions

Based on FTC Franchise Rule (16 CFR Part 436) — Template last modified June 2026

This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer

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