How to Review a Franchise Agreement (2026 Checklist)

How to review a franchise agreement A franchise agreement is heavily weighted towards the franchisor, who wrote it. Reviewing it well means understanding what you are committing to, spotting the clauses that limit your freedom or expose you to cost, and knowing which points are negotiable. This checklist walks the agreement clause by clause. It is general information, not legal advice; have a franchise lawyer review the actual document before you sign. Read the disclosure document first. In some markets a franchisor must give you a disclosure document (a Franchise Disclosure Document in the United States, and similar disclosure in other regulated markets) a set number of days before you sign. It contains the fees, the litigation history, and the franchisor's financials. The agreement and the disclosure must line up. ## The review checklist ### 1. The grant and the brand - What exactly is granted: the right to operate one unit, a defined territory, or a master franchise?

• Which trademarks, systems, and manuals are licensed, and for how long?
• Can the franchisor change the system, branding, or manual during the term, and at whose cost? ### 2. Territory and exclusivity - Is your territory exclusive, or can the franchisor place another outlet nearby?
• Does exclusivity cover online and delivery sales, or only a physical area?
• Can the franchisor sell the same products through other channels in your territory? This is one of the most valuable clauses to a franchisee and one of the most commonly diluted. ### 3. Fees and ongoing payments - The upfront franchise fee: what does it actually buy?
• Ongoing royalty: a percentage of gross or net revenue, and how is it calculated and collected?
• Marketing or advertising fund contributions: how much, and how is the fund spent and accounted for?
• Other charges: training, technology, renewal, transfer, and mandatory purchases. Add up the real cost over the full term, not just year one. ### 4. Obligations on you - Minimum performance or sales targets, and what happens if you miss them.
• Mandatory suppliers and whether the franchisor takes a margin on supplies.
• Standards, hours, refurbishment obligations, and inspections.
• Staffing, training, and personal involvement requirements. ### 5. Obligations on the franchisor - Training, launch support, and ongoing help, with specifics, not promises.
• What the franchisor must spend on national marketing.
• Whether the franchisor must keep developing the system and products. A franchise agreement that is all franchisee duties and few franchisor duties is a warning sign. ### 6. Term, renewal, and refurbishment - How long is the initial term, and does it match your lease and your payback period?
• Renewal: is it automatic or at the franchisor's discretion, and on what terms (often the then-current agreement, which can be worse)?
• Are you required to refurbish to the latest standard on renewal, and at what cost? ### 7. Termination - On what grounds can the franchisor terminate, and is there a cure period?
• Can you terminate, and what does it cost you?
• What happens on termination: you stop using the brand, you may face a post-term non-compete, and you may have to sell assets or stock to the franchisor. ### 8. Transfer and exit - Can you sell the franchise, and does the franchisor have to approve the buyer or take a transfer fee?
• Does the franchisor have a right of first refusal?
• What happens on your death or incapacity? ### 9. Restrictive covenants - In-term and post-term non-compete and non-solicit clauses: how wide, how long, and are they enforceable where you are? ### 10. Dispute resolution and governing law - Which law governs and where are disputes heard? A foreign forum can make enforcement expensive.
• Is mediation or arbitration required first? ## Red flags to stop on - Renewal entirely at the franchisor's discretion, with a forced refurbishment attached.
• A territory that excludes online and delivery, so the franchisor can sell around you.
• Mandatory supply arrangements with an undisclosed franchisor margin.
• A broad post-term non-compete that stops you earning a living.
• A governing law and forum far from where you operate.
• Gaps between the disclosure document and the agreement. ## Jurisdiction points to check - Disclosure and registration. The United States regulates franchise disclosure through the FTC Franchise Rule, with some states adding registration. Other countries have their own disclosure or registration regimes; India has no dedicated franchise statute, so general contract, trademark, and competition law applies. Confirm what governs your deal.
• Competition law. Exclusivity, resale-price terms, and supply restrictions can raise competition questions in many markets.
• Enforceability of covenants. Post-term non-competes are read narrowly in some places and struck down in others. Mark anything uncertain as "to verify with local counsel". ## Reviewing a franchise agreement in one place Everything above is manual review: read each clause, mark the risky ones, compare the agreement against the disclosure document, and keep track of what you asked the franchisor to change. That work can sit in one AI contract workspace. A tool like Adira opens a document and flags positions clause by clause as favourable, neutral, or unfavourable to you, surfaces missing or one-sided terms, lets you ask for changes in plain English, and keeps a timeline of every version as you negotiate. The idea is simply that understanding, marking, and tracking a franchise agreement do not have to be three separate tasks. This article is general information, not legal advice.