Each franchisee will have different important dates that they will be obligated to observe. Their “Effective Date” and their “Opening Date” might be different if your opportunity requires a physical location. Additionally, depending on how your model is structured, you might have training dates and time requirements for all of these different important dates.
The “Effective Date” is the date that a Franchise Agreement is fully executed, and it is the date that the Franchisor and Franchisee are bound to their respective obligations (confidentiality, non-compete, pre-opening obligations, etc.). The date that the franchisor completes the final signatures becomes the Effective Date. Even though this is generally the case, sometimes a franchisor and franchisee may want to delay the Effective Date of an Agreement, for example, if it is a Successor Agreement that will not become “effective” until the expiration of the current term.
The “Opening Date” is the date that the franchisee commences operation of the Franchised Business. This date might be a final day of training, or the first day a location is operational (like a grand opening). In many cases, the Term of the Franchise Agreement will expire a certain number of years following the Opening Date. This way, the Franchisor will receive a full term’s worth of royalties. Accordingly, considering the Terms of each, the Franchise Agreement will commence on the Effective Date. The Expiration Date of the Franchise Agreement will vary, depending on when the Franchisee opens for business.
There are factors that might alter these important dates, depending on the franchisee’s location, required training, state regulations or if the franchisee holds a particular Visa or Green Card. Each should be reviewed and discussed before the signing of an agreement to ensure transparency and to properly plan ahead for all parties involved.