franchise-nda

# Franchise Confidentiality / NDA

Protects franchisor proprietary information during franchise evaluation while preserving prospective franchisee due diligence access. Separates NDA obligations from FDD and franchise agreement confidentiality.

## Gather Before Drafting

1. **Parties** — Franchisor legal name, state of organization, principal place of business; prospective franchisee entity or individual details.
2. **Disclosure scope** — What will be shared: operations manual excerpts, FDD, financials, vendor lists, recipes, training materials.
3. **Timeline** — Anticipated disclosure dates and evaluation window.
4. **Jurisdiction** — Governing law and venue (typically franchisor home state).
5. **Business intent** — Confirm NDA is pre-franchise; does not guarantee franchise award.

## Draft Order

1. Parties and Recitals
2. Definitions
3. Exclusions
4. Permitted Purpose / Use
5. Confidentiality Obligations
6. Restrictions and Non-Contact
7. Required Disclosures by Law
8. Return / Destruction
9. Term and Survival
10. Remedies
11. No License / No Obligation / No Reliance
12. Governing Law / Venue / Jury Waiver / Arbitration (if any)
13. Miscellaneous
14. Signatures

## Core Clause Guidance

### Recitals

- Evaluation of possible franchise relationship only.
- No obligation to grant franchise.
- NDA is separate from FDD or franchise agreement confidentiality provisions.

### Confidential Information Definition

Include all categories: operations manuals, training materials, system standards; financial performance representations, pro formas, unit economics; marketing strategies, advertising assets, brand guidelines; supplier lists, pricing, vendor relationships; trade secrets, recipes, formulas, processes, know-how; business model, operational systems, existence of the opportunity.

- Cover all disclosure forms (written, oral, electronic, visual) before and after execution.
- No requirement to mark as confidential if apparent by context.

### Exclusions

Burden on recipient with documented proof:

- Publicly available without breach
- Rightfully possessed pre-disclosure
- Independently developed without use
- Rightfully received from third party without breach
- Legal compulsion — only with advance notice and cooperation for protective order

### Use Restrictions

- Sole purpose: evaluate franchise opportunity.
- Care standard: at least reasonable care, no less than recipient's own.
- Disclosure only to advisors with need-to-know bound by confidentiality.
- No reverse engineering or derivation.
- No contact with franchisor's franchisees, suppliers, or customers without written consent.
- No copies except as necessary; copies remain franchisor property.
- Breach notice and cooperation obligations.

### Return / Destruction

- Return or certified destruction within 5 business days of request or termination.
- Written certification of destruction required.

### Term and Survival

- Trade secrets: perpetual (or as long as trade secret status maintained).
- Other confidential info: 3–5 years from last disclosure or termination, whichever is later.
- Survival clauses for return, remedies, governing law.

### Remedies

- Injunctive relief and specific performance without bond.
- Monetary damages, disgorgement, attorneys' fees and costs.
- Liability for agents/advisors.
- Optional liquidated damages only if state law permits and amount is reasonable.

### No License / No Obligation / No Reliance

- No IP license or franchise rights granted.
- No obligation to disclose or enter franchise agreement.
- Recipient relies on own investigation; no warranties on accuracy/completeness.
- No partnership, joint venture, or agency created.

### Governing Law / Venue

- Franchisor home state law; exclusive venue.
- Consent to personal jurisdiction; waiver of inconvenient forum.
- Optional arbitration carve-out preserving court access for injunctive relief.

### Miscellaneous

- Entire agreement, amendments in writing, severability, waiver, assignment limits.
- Notice methods and addresses.

## Pitfalls and Checks

- Confirm consistency with franchise disclosure timing and the FTC Franchise Rule [VERIFY].
- Avoid overbroad restrictions unenforceable under state law — keep scope tied to evaluation purpose.
- Keep defined terms consistent and capitalized throughout.
- Make exclusions proof-based and document-dependent.
- Never allow blanket legal-compulsion disclosure without notice and protective order cooperation.
- If using arbitration, preserve immediate court access for injunctive relief.
- Ensure no IP license or franchise rights are implied anywhere in the agreement.