Format of Franchise Agreement- All About Franchise Agreement

What is Franchise Agreement?

The practice of a well-established business allowing another party to use its brand and operational model in exchange for a fee and a share of revenue. A franchise agreement specifies what duties each party must perform and what compensation each party can expect. Both parties are bound by its terms and conditions.

What should a Franchise Agreement cover?

There are several basic elements that need to be addressed in the franchise agreement, including, but not limited to: ● Overview of the relationship: This includes the parties to the contract, the ownership of the intellectual property (IP), and the franchisee's overall obligations to operate its business according to brand standards. ● Duration of the franchise agreement: It is determined by the length of the relationship, the franchisee's right to enter into new agreements, and whether the franchisee needs to upgrade its location. ● Initial and continuing fees: Franchisees generally pay an initial and continuing fee to the franchisor for entering into the system and remaining a franchisee. Additional fees may also be included in the agreement. Most franchise systems provide a payment to an advertising or brand fund. This fund is used by the franchisor to market their brand to the public, among other things.

● Territory assignment: Not every franchise agreement grants the franchisee an exclusive or even a protected territory, but the details about the territory must be clearly defined. Additionally, franchisees need to reserve their rights within a franchisee's territory, including alternative distribution sites and online sales. ● Site selection and development: Franchisees generally find their own sites and develop them according to the franchisor’s standards. Generally, the franchisor's role is to approve the location chosen by the franchisee and to certify that, prior to opening, the franchisee's building meets the brand's standards for design and other factors. ● Initial and ongoing training and support: Franchisees receive extensive pre-opening and ongoing support, including training, field, and headquarters support, supply chain, and quality control. ● Use of intellectual property, such as trademarks, patents, and manuals: An organization's intellectual property is its most valuable asset, and its IP will change over time. Franchise agreements define what is licensed to the franchisee, how the franchisee can utilize the IP, and how the franchisor can evolve the system through changes to the operating manual. ● Advertising: Franchisees will be informed of the franchisor's advertising commitment and fees required to cover those costs. ● Insurance requirements: Franchise agreements specify the minimum insurance requirements a franchisee must have before opening and during the term of the agreement.

● Record-keeping and the right to audit the franchisee’s records: The franchisor specifies the records its franchisees are expected to maintain, the software franchisees are permitted to use, and its right to access and audit franchisee records. ● Others: It may be called boilerplate, but in well-developed agreements, it is not. In the franchise agreement and other agreements, the franchisee's successor rights, defaults, terminations, indemnification, dispute resolution, resale rights, transfers, first refusal rights, sources of supply, advertising requirements, governing law, general releases, personal guarantees, and roll-up provisions are among the many issues covered.

Format for Franchise Agreement DRAFT OF FRANCHISE AGREEMENT

This AGREEMENT entered into on the...............................day of......................., 20..............

BETWEEN:

....................................................Limited a Company incorporate under the Companies Act, 1956 or Companies Act, 2013, having its Registered Office at..........................., represented herein by its................................. Shri................................................. (hereinafter referred to as the ''XYZ Limited '', which expression shall, whenever the

context so requires or admits mean and include its successors and assigns) of the ONE PART;

AND

M/s.................................................. a Partnership Firm, having its place of Business at.............................. represented herein by its Partner Shri............................. (hereinafter referred to as the ''AGENT'', which expression shall, unless the context so requires or admits mean and include its Partners for the time being, their heirs, legal representatives, executors and permitted assigns) of the OTHER PART;

WHEREAS XYZ Limited is engaged interalia in the business of marketing......products and are the owners of the trade name and trade mark ''XYZ'';

WHEREAS XYZ Limited is desirous of promoting........products under its trade name and trade mark by setting up chain or retail outlets all over the country on its own a also by appointing stockiest, retailers and franchises for the purpose of setting up of retail outlets;

WHEREAS the Agent has offered to set up one such Retail Outlet in the City of..... and has represented to XYZ Limited that it is in a position of invest necessary capital and is also possessed of a suitable premises to set up and carry on the Retail Outlet and XYZ Limited has accepted the said offer;

Franchise agreements require the following documents There are no specific documents needed to execute a franchise agreement.

Franchisees must establish that the franchisor has the authority to delegate franchisee rights and allied benefits to them. All pertinent documentation should be scrutinized for this purpose. Moreover, the parties need to thoroughly examine relevant documents pertaining to the identity of the parties involved in the agreement.