With the advent of globalization and liberalization, many business models for sustainability and prosperity have been adopted by companies. Franchising has been one of the profitable business models involving both domestic and foreign players. There are different types of franchising systems in place, including dealer arrangements, marketing arrangements, trade mark-use arrangements, distribution arrangements for products, production arrangements, etc. The negotiation, drafting, and agreement on the terms of the contract, created by mutual understanding between the franchisor and the franchisee, can regulate franchising.

A Franchise Agreement is a mutually agreed legal document between the franchisor and the franchisee that binds both the franchisor and the franchisee. It creates the legal obligations that the franchisor and the franchisee must fulfil, as well as the franchisor's clear expectation of the franchisee to run a mutually beneficial business. Franchises are a particular type of business model. Indeed, in the relationship between franchisors and franchisees, there is a significant power imbalance. 

Basic Requirements for Franchise Agreements:

• Nature of the partnership, responsibilities and business methodologies between the parties
• Franchising involves a reputed brand name most of the time. The agreement should therefore define the obligations relating to the marketing/advertising of the brand name by the franchisee in the territory in question.
• Process for the selection and approval of the sites for the operation of the company and responsibilities related to the development of designs and brands in the said sites to the standards set by the franchisor
• Intellectual property use/licensing, including trademarks, know-how, trade secrets, business-specific processes and systems, and other IP rights of franchisees, and limitations on the use of the same processes and systems
• Training linked to companies
• The duration of the franchise agreement, including details of termination, details of succession, etc.
• Franchising-related costs, including the fee payable at the starting point and the fee payable for the continuation of the franchise.
• Since each franchisor is in a position to grant franchising rights to more than one franchisee, the agreement must take care to draw up regulations relating to territorial franchising rights, so that one franchisee is not in breach of the other's rights. The limits of the assigned territory and the violation of territorial rights must be defined.
• Other clauses, including applicable laws/principles, termination, compensation, dispute resolution, terms of payment, exclusion rights, etc.

The advantages of a franchise agreement are that as a legally valid document, it binds all parties and calls for compliance with the provisions of the agreements, It helps to enforce in a mutually agreed manner the obligations set out in the agreement, Enables the avoidance of complex and expensive litigation in the event of a dispute, 

It acts as legally valid evidence, as the terms and conditions are carefully drawn up and agreed in advance, and the agreement offers to enforce the contract terms without any misunderstandings that lead to a long-standing relationship between the parties.

A franchise agreement should be valid enforceable and it must be drawn up for the mutual benefit of both the franchisor and the franchisee. Also, they should be designed to enhance understanding and avoid costly disputes. Lastly, there are different clauses to be included in franchise agreements based on business obligations, which also require legal competence to draft a comprehensive agreement.

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. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.