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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.
The franchise contract, like the Uniform Franchise Offering Circular (UFOC), is a very important document. The contract is probably the most important document in the transaction process.he franchise contract consists of two main parts: 1) the purchase agreement and 2) the franchise or license agreement. For convenience, occasionally the franchise transaction is split into two stages.