The terms used and description of the clauses in the Franchise Contract, etc., and the sample of the Agreement.
A franchise contract is a legal contract through which an established business consent to sharing its brand, operational model, and required support to other parties to set up and run a similar business in exchange for the fees and share of income generated. The terms of franchise contract consists of rough outlines of the franchising ownership costs, initial franchise fee, monthly royalty fee, etc. We will also learn about the terms used in the contract and the description of each clause in the contract. The contract consists of important terms that we will learn in detail.
Terms of Franchise Contract
The Franchise contract consists of the following terms:
The term ‘Grant’ in the franchise contract means the non-exclusive rights given by the Franchiser to the Franchisee to operate the latter. Until and unless the contract is terminated after the valid period, the Franchisee will enjoy the authority over the Franchiser to manage its system and its operations except in the restricted territories. Just like KFC Franchise contract.
In the contract, ‘Terms’ are the terms and conditions of the contract. For instance, the commencement date of the contract and the validity of the same. Further, the termination and renewal of the contract by both parties.
The term “ consideration” here means the factor that leads the franchise to grant the Franchisee a non-exclusive license for a period of so and so years. Further, the factor also depends upon the terms and conditions of the contract.
Training and Operating Assistance
The training and operating assistance mean that the Franchiser provides training and operating support to the Franchisee as per the contract. Further, the latter will help the employees of the Franchisee to understand the nature of the business and how to work for the same.
Operation of the franchised business
The operation of the franchised business in the contract means the duties and obligations of the Franchiser and the Franchisee as per the contract . Further, it includes the services rendered, system modifications, transfer of funds, etc.
The term ‘confidentiality’ in the contract means all the essential information that cannot be disclosed. Information related to the business that is approved by the Franchiser is strictly confidential.
The seventh term is Advertising. In this contract, the Franchisee has the right to advertise the business with the approval of the Franchiser. However, the advertisement should be favorable to the Franchiser, such as Bata Franchise advertising. They provide a high level of advertising on televisions, pamphlets, etc.
As per the contract, the operation of the franchiser business is given to the Franchisee, and the right to use the marks as per the contract’s terms and conditions is also given to the Franchisee.
Apart from the terms of franchise contractmentioned above, the franchise contract also consists of Franchisee obligations that the Franchisee needs to follow. They are:
- Without any restrictions and limitations, the Franchisee agrees as follows:
- Execution of the contract on the request of the Franchiser by the Franchisee with the Franchiser being the sole discretion. Further, in such marks, the Franchisee has to comply with any trade name, trademark, etc.
- The Franchisee agrees to affix a sign on the business premises claiming the business is owned and operated independently by the Franchisee who is authorized trademark owned by the Franchiser.
- Further, in case of infringement, the Franchisee will inform the Franchiser, and the Franchiser has the power to take action for the same.
- The Franchisee should cooperate with the Franchiser in case of their sudden inspection of the business.
- The Franchisee also agrees not to have conjunction with any firm, association, syndicate, or corporation. Further, even after the termination, the Franchisee, without the consent of the Franchiser, cannot have partnerships with other firms or syndicates.
- The Franchisee also agrees to deliver the Franchiser the details and acknowledgement of the directors, officers, and shareholders. Under the discretion of the Franchiser, review their provisions.
Termination of the Contract
The Franchiser has the right to terminate the contract and the rights granted immediately upon the written notice in case of the following events:
- Suppose the Franchiser, during the training program, discovers that the employees of the Franchisee are unable to manage or operate the Franchiser. In that case, the contract will be terminated and the Franchisee gets all the money they have invested except the additional cost incurred.
- After the termination of the contract, the Franchisee is eligible to receive all the payments back within the default period of 2 days.
- If the Franchisee breaches the terms and conditions of the contract, they are given notice of 10 days by the Franchiser after the written notice.
- The contract is terminated if the Franchisee fails to observe or perform any duties after ten days of written notice by the Franchiser.
- The franchise contract will be terminated if the Franchisee does not perform business for five days without prior consent from the Franchiser.
- Termination of contract is possible if the Franchisee threatens to cease the business and stop making payments.
- If the Franchisee works for the benefit of the creditors, then the contract is terminated.
- The contract will be terminated if the Franchisee fails to generate business: https://www.mca.gov.in/MinistryV2/incorporation_company.html as per the targets.
By following, you can create a perfect Franchise contract. if you have any queries regarding the terms of the franchise contract feel free to reach out to experts at Vakilsearch.