GLOSSARY

Franchise agreement

The franchise agreement is the binding contract you actually sign — distinct from the FDD, which is disclosure. The FDD describes the deal; the agreement is the deal.

The FDD exists to inform; the franchise agreement (attached as an exhibit to the FDD) is what binds you — typically for 10 years, with the franchisor holding most of the operational discretion. Terms buyers most often regret: personal guarantees, non-competes that outlast the agreement, mandatory arbitration in the franchisor's home state, unilateral system-change clauses, and renewal terms that let the franchisor re-price at renewal.

Almost everything negotiable about a franchise deal lives here, not in the sales process. Have a franchise attorney read it — and note that a franchisor's willingness to amend even small terms tells you how it treats franchisees generally.