Franchising is the way by which an entity (franchisor) which has developed a particular manner of conducting business tried to expand its business by giving other entities, existing or newbie’s, the right to utilize their successful business process. It may be made for another location for a definite period of time and a prescribed ongoing fee.
Franchising, thus, is a modified form of licensing arrangement where the rights to use a proven business model supported by the rights to use the Intellectual property owned and associated with the franchisor’s business are given to another for the sole reason of expansion and earning profits.
The Franchise Agreement is a legally enforceable document that documents the relationship between the franchisor and franchisee. Most businesses which are popular in the franchising business and who know the goodwill and desirability of their name in the market have a standard form of draft Franchise Agreement prepared and rarely provide any scope of negotiations.
Franchise Agreement lays down the terms of the franchising including the following:
- Details of the Franchisor and the franchisee,
- Franchise Fee & Consideration,
- Training, Supervision and Support to be provided by the franchisor,
- Responsibilities of Advertising and Brand Promotion,
- Terms of use of Trademark & Intellectual Property,
- The time period for the validity of the Franchise Agreement,
- Transfer or Assignment of Franchise,
- Termination of Franchise Agreement,
- Governing Law and Dispute Resolution etc
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