Franchise Agreement Sample pdf

Franchise agreement India KEYWORDS • What is a franchise agreement?

• master franchise agreement • franchise agreement format • master franchise agreement format With the exposure of the Indian market to the world, numerous new brands have prospered.

Franchising is the most lucrative business model that involves domestic professionals as well as foreign businesses. There are various types of franchising systems that can be opted by the franchisees to invest in. Some of them include the dealer arrangement, marketing arrangement, trademark-usage arrangement, manufacturing arrangement, product distribution arrangement, etc.

The advent of multiple foreign firms, franchise business has become one of the easiest and most effective ways to expand your business. This proves to be the most efficient both, strategically and financially. Rather than opening up new branches of your brand by investing your own money, it is better to sell your intellectual properties to an aspiring entrepreneur. This will enable you to expand your business without any further investment.

Although the government does not mandatorily instruct any franchise owner to get into an agreement with the franchisor, a franchise agreement regulated by the negotiation, drafting agreeing on the terms with mutual understanding, discussion and consideration.

What is a Franchise Agreement?

A Franchise Agreement is a legal document that is mutually agreed upon by the franchisee and franchisor, which binds both the franchisor and franchisee into a contract. It creates the legal obligations to be fulfilled by both the franchisor and the franchisee and also gives a clear picture of what the franchisor expects from the franchisee for running a mutually beneficial business.

It is a legal contract in which the franchisor consents to provide its brand, operational model, consumer engagement, and any required support to another party for them to set up and run a similar business in exchange for a fee and some share of the income generated during its operation. The franchise agreement also lays out the details of what duties each party needs to perform and the obligations that need to be followed.

It determines the terms and conditions for both the parties and binds them into a legal contract built by mutual agreement. Franchise agreements in India are subject to THE CONTRACT ACT, 1872 in case of general terms, and the COPYRIGHTS ACT and TRADEMARKS ACT govern the protection of intellectual property rights.

Master Franchise Agreement The Master Franchise Agreement is a type of franchise agreement that allows the Master Franchisee to operate more than one unit under the brand's name, the right to sub-franchise the right and to open units to other independent businesses (called Franchises), all during a specified time within a specific area.

A master franchise agreement is signed between three people: the franchisor, the master franchisor, and the franchisee.

The franchisor is the one who owns the business brand, the trademarks, and knows the method of business operations. A Master Franchise is the one that develops and expands the business by reaching out to various potential franchisees and guide them throughout the establishment process.

Master Franchise Agreement is well suited for international brands wishing to expand their business in India. A master Franchisee is often more knowledgeable and market-oriented.

He also has better connections business of the designated territory.

The mutual objective of the agreement is to further strengthen the Franchise System in a specific geographical region. To make this happen, the Franchisor grants the Master Franchisee the right to use the Franchise System. The master franchise is also provided a trademark license and a license for the use of any other intellectual property rights that need to be granted to the franchisees within the limits provided for in the agreement.

Franchise agreement format A Franchise agreement consists of the following contents: 1. Name and details of the parties getting into a contract.

2. Date of contract.

3. Nature of the business.

4. Term of the franchise contract.

5. Cost of the franchise.

6. Royalty fee and terms of payment.

7. The remedy for the transgression of rights or regression of terms or non-compliance with the agreement.

8. Conditions for eliminating the franchise agreement.

9. Restraints of usage of trade name or trademark.

10. Confidentiality terms.

11. Disagreement or dispute Resolution.

Need for a Franchise Agreement Even though it is not compulsory as per law to have a franchise agreement but it is a business need that should undoubtedly be fulfilled by both parties.

The major needs satisfied by a Franchise agreement in the franchise business are as follows: 1. IMPROVES CLARITY OF THE BUSINESS'S WORKING: The agreement involves a detailed description of the nature of work and terms of conferring the trade name and business of the franchisor which retracts the scope of doubts between the parties entering into the contract.

2. GUARDS THE WELFARE OF THE PARTIES: The parties are free to express their will, rights, and duties which can be mutually decided and incorporated in an agreement that reduces the scope of any possible conflicts between the parties in the future.

3. PROOF OF PARTNERSHIP TERMS: It acts as evidence that expresses the duties and rights which the parties have agreed upon.

4. SCOPE OF CONFIDENTIALITY: The agreement involves clauses that state compliance with any confidentiality that the parties may prescribe in their contract by mutual consideration.

5. INTELLECTUAL PROPERTY RIGHTS: The ownership rights and terms concerning the usage rights of a trademark or trade name will be clearly defined in the franchisor agreement that will establish the rights of both parties very clearly.

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Master Franchise Agreement Format A franchise agreement format consists of the following components: Preface This provides data on core issues and illustrates the key components of the agreement, clearly reflecting the goals and objectives of the parties getting into the agreement. following key components are recommended to be incorporated: • A description of the parties in the contract • A description of the franchise system and its past market functionalities • The ownership of the franchise system and a brief layout of the future framework improvements for changes regardless of the origin of such changes • Documentation of rights transferred from the franchisor to the master franchisee before the conclusion of the agreement and • The common goals of the parties in the contract.

Rights granted The core objective of a master franchise agreement is to additionally develop the franchise system in a designated region and to make this conceivable by franchisor acknowledging the master franchisee the right to utilize the franchise system, trademark license, and the license for the use of any other Intellectual Property Rights provided and to grant franchises to subfranchisees within the specified limits and period as mentioned in the agreement.

Territory of work The geographical area that has been assigned to the master franchisee should be defined unambiguously. Depending upon the accomplishment of clearly set targets, either in terms of turnover or the number of sub-franchise units to be opened or a combination of both, the parties can opt for the expansion or reduction of the territory appropriately.

Exclusivity The master franchisee has to make that there is a considerable advancement in the work progress of the franchise business in the designated territory. They would want to be granted exclusivity for that designated territory. It means that the master franchisee has the unlimited right to franchise the business in the designated territory to the elimination of any outsider including the Franchisor itself if no limit is set to exclusivity.

Development schedule Master franchising agreement will incorporate a development schedule listing the advancements in the number of franchise units to be opened in the designated territory. It is advantageous for both of the parties involved. It makes it quite easy to approach this subject practically to keep the disputes at the least position. The agreement should be able to provide solutions for the circumstances where developments are not made.

Fees

Master franchise agreements essentially cover two kinds of franchise fees paid by master franchisees to franchisors. The first is the initial fee paid to the franchisor for the rights allowed. The second is an ongoing franchise fee which is also referred to as royalty or continuing fee. It is paid by the master franchisee for the utilization of the franchise system and the ongoing support service provided by the franchisor. The franchise fee is a charge by the franchisor levied for proceeding with the utilization of the rights granted and support provided.

Agreement with sub-franchisee Mostly, the master franchisee is obligated to utilize the standard franchise agreement and to ensure that it complies with the local (mandatory) laws. Another way would be that the master franchisee may retain the right to compose a standard franchise agreement given that this standard agreement which contains all the provisions deemed mandatory by the franchisor.

Termination Master franchising agreement will readily terminate at the end of the franchise term, unless the conditions of renewal if agreed upon, have been met. Termination for either party is to be provided in the master franchise agreement. Early termination by the franchisor in the case of a material infringement or natural termination in the event of bankruptcy, insolvency, etc, of the master franchisee is typically added through local bankruptcy and may decide the effectiveness of termination.

Applicable law and dispute resolution Typically, the law of the country in which the franchisor is domiciled is relevant as the choice of law to the master franchising agreement. Careful consideration must be provided to several relevant factors to arrive at a well-thought conclusion. In case of any disputes under an international master franchise agreement, international dispute resolution will be the most solution. Arbitration is by and large, less tedious and time-consuming, and less immoderate than litigation. It has an adaptable and neutral forum and permits the parties to choose a mediator with relevant subject-matter expertise.