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LiudmylaSupynska/iStock/Getty Images. In its broadest sense, a franchise agreement is a legally binding contract between a franchise organization and a franchisee. The agreement specifies the rights and obligations of each party, as well as what activities are prohibited.
Types of Franchise Agreements. There are different types of franchises, and as such, there are different types of franchise agreements. However, every franchise will require a franchise agreement and a disclosure document. Franchisors and Franchisees are required to comply with the mandatory industry code, the Franchising Code of Conduct.