A franchise agreement gives the franchisee the right to use names, trademarks, service marks, logos, slogans, designs and other brand cues. The franchisor will also grant the right to use other intellectual property rights such as instruction notices and proprietary software systems. If you become a franchisee, you have the right to operate your business with a brand for a defined period of time. The minimum term of a franchise agreement is usually five years. Franchise contracts rarely last more than 20 years. The duration of the franchise agreement must be clearly stated and you must inquire about what is happening at the end of the period. Fit-Out – Explain the cost of the franchise equipment. Since there are no specific laws governing the franchising industry in India, it can be disastrous for the franchisor or franchisee if the agreement is not concluded with the right precautions. Here are the few clauses you should look forward to before signing a franchise agreement. A franchise agreement is a legally binding contract that defines the terms of the agreement between you and a potential franchisor.
Franchise agreements are generally valid for 5-10 years with an optional extension clause. It is important to seek the advice of experienced business lawyers who are well aware of franchising contract management, as a long-term commitment like this can include you for many years and the way your business is run is often left to the discretion of the franchisor. The franchise agreement describes the costs of franchised ownership. All deductibles charge a fee. These include upfront franchise fees, as well as current fees such as monthly licensing fees, advertising or marketing fees, and other taxes. If you find clauses in the contract that are non-negotiable to you, you can ask questions about your potential franchisor to find out why these clauses were included and whether the franchisor would consider including them in the contract, but there is a good chance that the franchisor will not negotiate anything important. If you feel that the contract is unfavorable and would prevent you from getting a good return on your investment, your best bet is likely to follow another franchise with more advantageous terms. The franchisor sometimes reserves the right to file an injunction under certain conditions (z.B to prevent the franchisee from disclosing confidential information about the franchise system).
The agreement will indicate jurisdiction over the filing of appeals. The choice of jurisdiction will be favourable to the franchisor. A franchise takes you down the express route to commercial ownership and installs you with a business model, a system and a recognized brand name. You may be able to obtain a change in the franchisor`s right to redeem your franchise if you try to sell before your contract expires. Termination – Provides an explanation of the process that should be followed if you decide not to renew the deductible after the end of the agreement. There are good reasons why franchisors generally do not negotiate contracts. Most franchises have been around for years and have developed successful business models. They generally know what works much better than their franchisees, so they insist that the contract be established so that they know it will work well for themselves and for franchisees. Deliveries – details on who will deliver the franchise. Legal aid is generally necessary, even if you are not trying to negotiate changes to the franchise agreement, so you should consider it part of the deductible costs and the corresponding budget.