Part 1: The Foundation of Franchising — Agreements, Contracts & Business Essentials 🏗️
Starting a franchise? 🎉 The secret to success isn’t just about having a great product — it’s about building a strong foundation with the right contracts, disclosures, strategy, training, and systems.
In this first post of our 5-part franchise series, we’ll provide an overview of the key legal documents and business elements that every franchisor needs to know before you open your doors.
Let’s dive in! 👇
🔢 What is an FDD?
The Franchise Disclosure Document is the primary legal document used to offer and sell franchises in the United States.
It is required by the Federal Trade Commission (FTC) and is needed in every state. At its core, the FDD is a disclosure tool. It includes 23 items covering your business history, legal structure, initial fees, ongoing costs, territory rights, obligations, financial performance representations (if any), and much more.
But it is also much more than a disclosure tool. Your FDD becomes the roadmap for your business relationships with franchisees. Each FDD contains the actual contract your franchisees will sign—the franchise agreement—which governs the next 5, 10, or 20 years of your business relationship.
🔗 Check out Part 2: Developing Your Franchise Disclosure Document (FDD) ›
📜 The Franchise Agreement — Your Core Contract
This is the main legal document between you (the franchisor) and your franchisees. It sets out the rules, responsibilities, and expectations for both sides.
Every franchise agreement should be tailored to your unique business — it’s not one-size-fits-all!
Think of it as the backbone that holds your franchise system together and protects your brand. Your form franchise agreement will be included in the FDD.
✍️ Other Important Contracts
Besides the franchise agreement, you might need:
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Vendor contracts
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Financing agreements
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Service agreements
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Employee or owner restrictions
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Lease riders
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Social media and listing assignment agreements
These contracts often get included in your Franchise Disclosure Document (FDD) — which we’ll cover next in Part 2!
🛠️ Business Elements & “The System”
Franchisees want a business that’s easy to operate and proven to work — the famous “business in a box.” Your system needs to be well-documented, easy to teach, and scalable across locations.
To deliver on that promise, franchisors must clearly define and organize their core business elements.
📘 Operations Manual
You need prepare an Operations Manual before offering franchises. Your franchise operations manual is the franchisee’s guidebook.
Unlike the FDD, it’s not public — it’s only for franchisees under strict confidentiality.
A detailed operations manual protects your business know-how and keeps your system consistent – providing guidance on:
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Daily procedures (open/close routines, customer service protocols, reports, etc.)
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Standard recipes or service delivery methods
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Technology systems and how to use them
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Inventory and vendor relationships
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Brand standards for marketing, signage, uniforms, and more
🔧 A thorough manual helps maintain consistency across units, which is key to protecting your brand and satisfying customers no matter the location.
🧠 Proprietary Know-How
Every great system has its secrets—your signature processes, service model, or efficiency hacks. Documenting this “know-how” and embedding it into your training and manuals adds real value to your franchise offering.
💡 Pro Tip: If it’s not written down, it’s not well protected—or transferable. Solid documentation reduces dependency on individual employees or founders and supports your legal position if disputes arise.
🎓 Training & Support
Initial training is a huge milestone for franchisees to complete before operating a franchised business. Franchisors must develop a training program to teach their System and empower franchisees with the know-how they need to succeed.
The FDD will include an overview for training and support – both what you are required to provide and what franchisees are required to complete.
It starts with initial training.
📍 Initial Training
This usually occurs:
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At your corporate headquarters or training facility
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On-site at the franchisee’s location
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Virtually, using digital resources and learning platforms
Initial training should cover:
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How to operate the business
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How to manage staff
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How to use point-of-sale and other systems
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How to handle customer interactions
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How to market locally while staying on-brand
✅ The goal: Get your franchisees confident and operational fast.
Although you may not develop ongoing training prior to launch – its important that you start considering what ongoing training you will provide and require to ensure your FDD and contracts align with your long term growth strategy.
Why provide ongoing training?
🔄 Ongoing Training
Your system should evolve—and your franchisees should too. That’s where ongoing education comes in:
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Refresher courses on compliance or procedures
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New product/service rollouts
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Updates to branding or marketing strategy
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Manager and leadership development
📈 Continuous learning supports long-term performance and loyalty.
™️ Protect Your Brand with Trademarks
If you’re planning to offer franchises, securing a federally registered trademark should be one of your first legal priorities.
Your brand is the heart of your franchise offering—it’s what your franchisees are buying, and what your customers are trusting. Yet many new franchisors begin selling franchises with only common law trademark rights, leaving themselves exposed to legal risk, slower state approvals, and avoidable disputes.
Ensuring your brand is suitable for federal registration + applying early is key.
🚀 Ready for the Next Step?
Knowing the legal and business basics is step one!
Up next, we’ll cover the cost and process of developing your Franchise Disclosure Document (FDD) so you can get your franchise offering ready to roll.
💡 Want Help Building Your Franchise Foundation?
Don’t go it alone! Our experienced franchise attorneys at Waldrop & Colvin can help you draft smart agreements and build a strong system that protects your business.
📞 Explore our website to learn more about how we help franchisors or schedule your free consultation today!
