Franchise Agreement

An agreement wherein the franchisor agrees to lend the trade name or business system to another person or entity (the franchisee).

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How does Franchise agreement work for you?

This agreement lets an organization lend their Intellectual properties to help you pursue business
under the same brand name covering all conditions.

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What is a Franchise Agreement

A franchise agreement India is a contract where a business person consents to grant the enterprise name or company system to an individual or an entity (the franchisee). The franchise agreement format will characterize the foundation of the terms between both the consenting groups, define the remuneration for the franchisee (payment in the way of royalties, for the usage of the business trademark, etc), mention conditions upon the usage of the brand name, specify the extent of the agreement, mention terms concerning disciplinary provisions (varying from financial penalty and allowances to withdrawal of the business franchise and the contract) and so on.

Guidelines of a Franchise Agreement

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What are the benefits of a franchise agreement?

Certain benefits of a franchise agreement India are mentioned below-

Defines The Guidelines

A franchise agreement permits the businessman (who is franchising his company) to define guidelines for the maintenance of quality related to different facets of the trade before onboarding the client and binding them in a franchise contract.

Brand Management

With a franchise agreement format in place, the franchisor can set guidelines for how the franchisee adopts the business and branding. Also, the penalties for mismanagement or violation of the business branding are defined in the agreement to protect the brand name at all times.

What should a franchise agreement include?(Checklist)

The most essential elements of a franchise agreement sample are mentioned below-

Franchisor-franchisee details and relationship

The details of the franchisor and franchisee and their relationship are outlined at the very beginning of the franchise agreement draft.

Agreement duration

It is the decided tenure of the franchisor-franchisee relationship. The duration can be extended if both parties wish to continue the relationship further.

Franchisee fee and related matters

Matters related to franchisee fees, royalties, deposits, etc, along with their due dates and modes of payment are discussed in a separate segment. These considerations will be as per discussions between the franchisor and the franchisee before the signing of the agreement.

Site selection & development

It is the responsibility of the franchisee to find out a suitable location for its business unit and obtain the approval of the franchisor, before signing the agreement. The detailed requirements of the location and the specification of the business unit must be mentioned in this section.

Business operations

This section will include detailed information about the support to be extended by the franchisor and the responsibilities of the franchisee. Some of the areas covered here will include-

  • The operation of the franchisee unit, as per the operating standards set by the franchisor
  • The goods and/or services the franchisee is allowed to offer
  • The goods and/or services the franchisee needs to purchase exclusively from the franchisor
  • Branding and advertisement

    This section of the franchise agreement mentions the responsibility of the franchisor to spend in branding and promotional activities to help the business. The responsibility of the franchisee towards brand building activities is also mentioned in clear terms.

    Intellectual property and trademark

    This section mentions the use of intellectual property (patents, trademarks, manuals, etc) of the franchisor by the franchisee. It also has clauses to prohibit the use of such assets by the franchisee after the termination of the franchise agreement.

    Training and support

    It is the responsibility of the franchisor to provide the required support, training, and supervision to the franchisee. Details regarding this are mentioned clearly in this section.

    Termination clause

    This clause includes detailed provisions related to the termination of the franchise agreement if either party fails to perform as per the terms mentioned in the agreement. It will also mention the fines/penalties applicable and the liabilities of the parties involved after the termination of the agreement.

    What is the process of preparing a franchise agreement at Vakilsearch?

    3 Business Days

    Upon contact, your request to prepare a franchise agreement will be received and our representative will be in touch with you to take your request forward. If we need more information from your end, we will call you as and when required. After we receive all your details, our in-house lawyers and legal experts, will create the franchise agreement draft and send it across for your view within 2- 4 business days.

    2 Business Days

    Your original price includes two rounds of iterations. Therefore, if you need any changes done to the franchise agreement sample, our lawyers will do the needful and send it across to you for your approval once again.

    FAQs on Franchise Agreement

    What is a franchisee?

    A franchisor is any business, which has a parent company that provides a basic business model and brand name. The parent company loans these principles and brand image to a third party, known as a franchisee. While the franchise is owned, operated, and managed by individuals, the entire process is overseen by the larger parent company, which is usually an MNC.

    Does India have specific laws for such franchisee businesses?

    No. India does not have separate laws that deal explicitly with franchise business models. However, we do have laws regarding how they must function. India does not have any particular law that deals specifically with the franchise agreement, its termination, the setting of clauses, and non-disclosure. But several enactments help control and regulate the functioning of franchise businesses in India.

    What are the different laws and acts that help with Government franchisee business in India?

    The different laws which govern various aspects of franchising in India are as follows:

    • The Indian Contract Act, 1872.
    • The Competition Act, 2002
    • Income Tax Act, 1961
    • Consumer Protection Act, 1986
    • Arbitration and Conciliation Act, 1996
    • The Foreign Exchange Management Act, 1999
    • The Trademarks Act, 1999
    • Patent Act, 1970
    • Design Act, 2000
    • Copyright Act of 1957

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    Recent Updates

    Airtel Thanks its Franchise Players for Contributing to its Growth

    18-May-2020: Bharti Airtel, the telecom giant, has released its quarterly report today for its Home Services segment. The company has said that it has achieved a YoY (Year-on-Year) growth of 3% as of March 2020. The company has thanked its franchise players for expanding its presence and contributing to its growth.

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