A franchise agreement (FA) is a contract to grant an enterprise name or company system to a person or an entity (the franchisee) by the businessman/company. The FA lays the foundation of the terms between the consenting groups, the payment to the franchisee (Business trademark royalty payment, if applicable), conditions to use the brand name, disciplinary provisions i.e., financial penalty, and allowances to remove the business franchise and the contract.
Some benefits of an FA are categorized below.
An FA allows the franchising company to define guidelines to maintain the quality related to the trade before onboarding the client and executing a franchise contract.
The franchisor can set guidelines specifying the adoption of the business and branding. The penalties for violation of the business branding too are defined in the agreement.
The core elements of a franchise agreement are as below.
The beginning of the FA specifies the franchisor-franchisee relationship.
This is the agreed duration of the franchisor-franchisee relationship and can be extended if both parties wish to extend it.
There is a separate section in FA related to franchisee fees, royalties, and deposits along with due dates and modes of payment on the agreed terms between the franchisor-franchisee.
Site selection & development
The detailed requirements of the location and the specification of the business unit as authorized by the franchisor are specified in this section.
This section deals with the support provided by the franchisor and the responsibilities of the franchisee. It specifies the operation of the franchisee unit, the goods, and services the franchisee is allowed to offer, and the goods and services the franchisee needs to purchase exclusively from the franchisor.
This section of the FA specifies the responsibility of the franchisor to spend on branding and promotional activities to help the business. The responsibility of the franchisee towards brand building activities is also outlined.
This section mentions the use of the intellectual property (patents, trademarks, manuals, etc.) of the franchisor by the franchisee along with clauses to prohibit the use of assets by the franchisee after the termination of the FA.
Details related to the responsibility of the franchisor to provide the required support, training, and supervision to the franchisee.
This includes provisions related to the termination of the franchise agreement in case any party fails to perform as per the terms mentioned in the FA. The penalties and the liabilities of the parties are also mentioned in this clause.
One can take the help of any law firm who can help to prepare an FA and generally take 3-5 business days.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.
