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Franchise Agreement Red Flags Checklist

By FranchiseFeast Editorial

A section-by-section list of the clauses to scrutinize in a franchise agreement and FDD before you sign, framed as questions to take to a franchise attorney.

The franchise agreement is where the real deal lives, and it is written by the franchisor's lawyers to protect the franchisor. This checklist walks the clauses that most often surprise buyers later, so you can spot them, ask about them, and take the important ones to a franchise attorney before you sign. It is educational, not legal advice, and every item is a question to take to your own advisors.

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Start here: what governs the deal (FTC Franchise Rule)

Personal guarantee scope

Arbitration, venue, and choice-of-law

Termination rights and cure periods

Non-compete scope, duration, and geography

Transfer and assignment fees and approval rights

Territory and encroachment protection

Renewal terms and conditions

Required purchases and approved suppliers

Franchisor-favorable fee-change rights

Personal liability and indemnification

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Before you sign anything

This resource is for general educational purposes only and is not legal, financial, or tax advice. Franchise laws, the FDD, and franchise agreements vary by state and by brand. Review the full FDD and franchise agreement with a franchise attorney licensed in your state and a qualified accountant before you sign anything or pay any money.

Sources

  1. FTC, A Consumer's Guide to Buying a Franchise
  2. FTC Franchise Rule, 16 CFR Part 436
  3. FTC (2024), action on franchisee complaints, illegal fees, and gag clauses