The ongoing rights for the franchisee include but are not limited to: the right to use the trademark and goodwill associated with the trademark, use of trade secrets, use of operations manual and know-how, copyright material, and other proprietary material.

The intellectual property rights (hereafter IP) that the franchisee has access to is the franchise agreement core element. Without IP rights, the franchisor would have nothing unique to offer the investor.

That is why every franchise agreement has some form of IP grant for the franchisee to use.

Depending on the type of franchise, there may also be an exclusive territory assigned to the franchisee. However, the exclusive territory can vary in size; if the franchise is in a largely populated area, the exclusive territory will be smaller, and likewise, the territory will be larger in a less populated area.

The franchisee’s respective obligations include but are not limited to conducting the franchise business operation from a location approved by the franchisor, maintaining confidentiality, and operating in the manner prescribed by the franchisor, which is usually detailed in the operations manual. The operations manual includes opening hours, recipes, menus, attire, and other operating related guidelines explicitly designed for that franchise.

The franchisee must also pay fees, provide accounting and reporting, and participate in collective centralized advertising. The fee is usually a combination of an initial fee and then continuing payments of royalties tied to revenue. The initial fee can vary from franchises; for instance, McDonald’s has an initial franchise fee of forty-five thousand dollars, whereas 7-Eleven’s initial fee is one million dollars.

One of the benefits of a franchise is a comparative advantage that allows the franchisor to collect advertising fees from all the franchisees and then use those fees to target a broader audience. This contrasts with how large an audience a single independent business could afford to focus on targeting.

A franchisee also may have obligations to purchase goods from a specific source to ensure the standard of quality is maintained (whether that is from the franchisor themselves or a third party), keep an insurance policy, and allow the franchisor to inspect the premise of the franchise to maintain quality control.

Also, there may be a lease contract involved in purchasing a franchise. However, this does not apply to mobile franchises that operate, for instance, from hotdog stands. The lease contract can either be with a third party or with the franchisor.

The franchisor has the exclusive rights of the IP. For example, unless agreed upon, the franchisee cannot sell other franchises. In addition, the franchisor usually maintains control of all advertising and online selling to avoid fragmentation in the system.

The franchisor’s obligations are usually minimal and center around providing assistance and training the franchisee.

The initial training can vary in terms of length and quality, depending on the franchise. For example, McDonald’s has a twelve to eighteen-month training program situated inside the restaurants, and 7-eleven has an intensive program that lasts six to eight weeks. The level of assistance offered in a franchise is one of the main reasons people choose franchising; they cannot operate a business entirely independently.

As can be observed from above, the franchisee has more obligations to fulfill than the franchisor. The reason is that the franchisee wants to become a part of the franchise system that the franchisor is offering; therefore, it only follows that the franchise agreement would be centered around the franchisees’ rights and obligations. Furthermore, in almost every instance, the franchisor writes the franchise agreement and subsequently is why the franchisor does not voluntarily set obligations for itself.