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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.
âOwning a franchise allows you to go into business for yourself, but not by yourself.â A franchise provides franchisees with a certain level of independence where they can operate their business. A franchise provides an established product or service which may already enjoy widespread brand-name recognition.he franchisee is not completely independent. Franchisees are required to operate their businesses according to the procedures and restrictions set forth by the franchisor in the franchisee agreement. These restrictions usually include the products or services which can be offered, pricing and geographic territory.