Reservation agreement

What are the franchisor’s obligations?

Exclusivity

The candidate will be granted an exclusivity on a certain geographical area.

The franchisor will thus commit not to enter into a franchise agreement with a third party for the operation of the franchise within that reservation area, and not to open owned-stores within this area.

Other obligations

It is also possible to provide for other obligations:

• the franchisor may assist the franchisee is searching for premises
• the franchisee may commit to perform a deep local market study to determine the locations envisageable to open a unit under the franchised concept

And the obligations of the franchisee candidate?

Reservation fees

In return for the exclusivity granted by the franchisor, the latter may require the prospective franchisee to pay a reservation fee. Very often, this reservation fee will be deducted from the amount of the entry fee that will be paid by the franchisee candidate under the franchise agreement.

Other obligations

The franchisee candidate must look for commercial premises which must correspond to the franchisor’s recommendations to this effect.

The franchisee candidate also undertakes to take the necessary steps to obtain the finances required for the opening.

Duration of the reservation agreement

The reservation agreement will generally be granted for a certain reasonable term – from 1 to 12 months, taking into consideration the necessary time for the prospective franchisee candidate to be able to open his franchised unit.