Sample Format Of Franchisee Agreement

Narendra Kumar

15 Jun, 2019

FRANCHISEE:

Franchisee Agreement is a legal contract between two or more legally competent parties wherein a well-established business consents to provide its brand, operational model and required support to another party to run the same business in exchange for a fee and some share of the income generated from the same business.

WHAT IS FRANCHISEE AGREEMENT?

A written document where two parties enter into an agreement in which deep-rooted renowned business consent to provide its brand, operational model and required support to another party on certain specified terms and conditions mutually agreed between the parties is called a FRANCHISEE AGREEMENT.

It is a document in which one party allows other to operate or run the same business with the same brand name or product or services as the case may be in exchange for a fee and some share of the income generated. The franchise agreement specifically lays out the facts or specifically mention what duties each party needs to accomplish and what return they can expect.

A Franchisee, through a franchise agreement, is granted the right and obligation to establish and operate a franchised location.

WHAT ARE THE PARTIES TO THE AGREEMENT?

In a franchisee agreement, there are two parties namely; Franchisor and Franchisee.

FRANCHISOR:

He is the person or a party which grants the right to another party to use its business, model, product or services.

FRANCHISEE:

He is the person or a party which buys the right to run the business of franchisor.

WHAT IS A ROLE OF A FRANCHISOR IN AN AGREEMENT?

Franchisor is usually an entrepreneur who has positioned the foundation to create a successful, established business. He or she brings the following valuable assets to the franchisor/franchisee relationship:

A RECOGNIZED BUSINESS MODEL:

In order to become a franchisor, the person must have stretched a point in which his or her business model irrefutably works. Consumers must be aware of the products or services in which franchisor is dealing with and must be awake with your brand.

A RECOGNIZED TRADEMARK 

A registered and well-known trademark is amongst the utmost valuable assets that a businessman has acquired through a proper vigilant study as well as trial and error.

Establishing a recognized trademark and securing the federal rights to that mark often requires a great deal of time and dedication and franchisor should have that renowned trademark.

ESTABLISHED BUSINESS SYSTEMS 

A businessman develops a system of conducting business that produces reliable results. Franchisor starts from the very scratch to make his business grow from working with customers and clients to delivering products services, the franchisor has an established business model that franchisees will follow.

TRAINING AND SUPPORT

One of the biggest assistance that the franchisor provides and the franchisee required is wide-ranging training and on-going support. With the guidance of an experienced entrepreneur, the franchisees learn from someone with proven success.

WHAT IS A ROLE OF A FRANCHISEE IN THE AGREEMENT?

Essentially, a franchisee monitors the franchisor’s successful business and then the role of franchisee turns to duplicate the successful business of the franchisor. To expand the business of the franchisor into a regional or national market is the main role of the franchisee. It requires significant investment and works including the following:

PAYING FRANCHISE FEES

Franchisees are mandatory to pay a fee in order to obtain the right to establish a franchised business location called franchisee fee as well as a percentage of gross revenues and a fee for advertising costs.

MANAGEMENT OF FRANCHISE LOCATION

Franchisee takes the business of franchisee he withholds the training and know-how and then he puts all these into practice to run the business effectively and successfully and control the day to day work independently.

GENERAL PROVISIONS THAT REQUIRED TO BE COVERED IN FRANCHISE AGREEMENT

Though there is no standard format for drafting the franchise agreement as the terms and conditions vary franchise to franchise and industry to industry. Few provisions that are required to be covered in the agreement are as follows:-

1. RIGHTS GRANTED

The Franchisor grants to the Franchisee during the enforcement of this Agreement and subject to the terms and conditions hereof the rights to carry on the Business in accordance with this Agreement including the right to use the know-how, the products or services etc.

2. TERM

This provision states the duration of the agreement from when the agreement shall come in to force and the period how long it shall be in force.

3. RENEWAL

If the franchisee gives the written notice of his desire to renew the agreement and franchisor consider it fit then the Franchisor and the Franchisee will enter into a new standard Agreement.

4. FRANCHISOR’ S OBLIGATIONS

The franchisor shall:-

• Assist the franchisee to establish and commence the business effectively.
• Assistance in day to day operation
• To conduct a training programme on monthly basis.
• To conduct a training programme for the staff as well.

      5. FRANCHISEE’S OBLIGATIONS

The Franchisee agrees to protect the Franchisor’s business and intellectual property rights and shall maintain the identity of the business in common.

6. PROMOTION AND ADVERTISING

That FRANCHISOR will supply the product promotional material and physician samples to the FRANCHISEE from time to time.

7. SEVERABILITY

If any part or part of this agreement becomes unenforceable for any reason, the rest agreement shall be continued in full force and effect.

8. NOTICE

Describes how and where the parties shall formally communicate to each other in the event they need to take such action (e.g., all notices shall be deemed to have been received by the other party within five working days if sent by regular mail to the addresses below).

9. FORCE MAJEURE (AN ACT DONE BY GOD)

If an Event of Force Majeure results in a loss or damage to the business location or Property then who shall rectify such loss or damage to the extent required by the franchisee to reuse the property in the same manner as before.

10. MISCELLANEOUS:

Besides the above-mentioned points franchisee agreement shall also include the following:

11. Franchisee’s accounts
12. Audit
13. The sale of the business
14. The death of the franchisee
15. Termination
16. Post-termination provisions
17. Copyright
18. Entire agreement
19. Waiver
20. Warranties
21. Improvements