There are certain legal requirements that a franchise operation must be aware of. These legal requirements generally are based upon federal or state laws. The legal obligations of a franchisor before starting a franchise include the development of a Uniform Franchise Offering Circular (UFOC) as well as a franchise contract or agreement. 

The uniform franchise offering circular is explained in much greater detail in Chapter 7 of this guide. The UFOC is basically a requirement of the Federal Trade Commission adhering to the federal franchise disclosure rules of 1979 and requires the disclosure of twenty-three specific items relating to the franchising business.

In addition, a franchise agreement or contract needs to be developed for the franchisee to sign. The franchise contract or agreement generally lasts from ten to twenty years in most cases, although some may be for as little as one year and some are for perpetuity. The franchise agreement is designed to explain all the contractual relationships between the franchisor and franchisee including exclusive territory, fees, royalties, training, obligations of franchisor and obligations of franchisee. In addition, an important section concerning terminations and nonrenewals is also contained in both the UFOC and franchise agreement.