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A franchise agreement is a legally binding document that outlines the terms and conditions of the franchisor-franchisee relationship. It governs the rights and obligations of both parties and sets out the expectations for each party's conduct.

Often, franchisors choose the Limited Liability Company structure for their entity. Technically, a franchisor entity can be formed in any state. However, it's wise for franchisors to discuss their options with an attorney and tax professional before deciding.

How much does it cost to start your own franchise? Franchise startup costs can be as low as $10,000 or as high as $5 million, with the majority falling somewhere between $100,000 and $300,000. The price all depends on the industry, location and type of franchise.

Before you can get your operation going, you'll need to have enough initial capital as well as an overall net worth before even considering starting a franchise. Unless you're independently wealthy, you may have to borrow money. Start with commercial banks since they fund many types of franchises.

How to franchise a business Make sure your business is ready to franchise. Protect your business's intellectual property. Prepare a financial disclosure document (FDD) Draft a franchise agreement. Compile an operational manual for franchisees. File or register your FDD. Set a strategy to achieve your sales goals.

Important Parts of a Franchise Agreement Template This includes: Names and contact information of the Franchisor (the entity that owns the brand) and the Franchisee (the person opening and running the franchise) Location of the franchise, including any limits on other franchises within the geographic area.