Do Business Well

A typical franchise agreement will, subject to the needs of a particular industry, contain provisions covering the following aspects of the arrangement:

Term of the franchise (initial period, renewal rights);

• Initial financial obligations of the franchisee (upfront fee);

The rights granted to the franchisee (the grant);

• Setting up of the business and related issues (site selection, lease, fitting-out, decor and equipping of the outlet and the necessary specifications);

Initial assistance provided by the franchisor (for example assistance with lease negotiations and negotiations for finance, initial training, fitting-out and equipping the business premises, staff selection, grand opening etc.);

Compulsory purchasing arrangements (either the franchisor acts as the supplier or he prescribes suppliers);

Detailed operating guidelines, usually contained in the operations manual (see the paragraph headed “Relationship Franchise Agreement - Operations Manual” later in this discussion);

n Extent of ongoing assistance (training, product development, audits of quality standards and business performance);

A man who acts as his own attorney has a fool for a client.

Franchisee’s ongoing operational commitments (adherance to prescribed business hours, minimum staffing, specified range of products and services, compulsory purchasing from franchisor and / or prescribed suppliers, participation in national advertising campaigns, minimum spending on local advertising; requirement to keep books of account, comply with statutory requirements and submit certain reports);

Payments to the franchisor (initial franchise fee, weekly or monthly management services fee, contribution to the advertising or marketing fund, other payments, amounts or basis for calculation - payment terms);

Systems modifications (access to systems improvements implemented by the franchisor and conditions pertaining to systems improvements initiated by franchisee);

Restraint of trade (during the period the agreement remains in force and beyond);

• Enforcement of the contract (provision for the arbitration of disputes, selection of venue, allocation of costs arising from dispute resolution and similar issues);

Conditions governing the sale of or the transfer of control over the franchised unit (including provisions covering the eventuality of the franchisee’s death);

Termination of the agreement (either because it has come to an end or as a consequence of breach of contract including a definition of “breach of contract” and a list of consequences of termination);

Standard clauses (these will normally include statements setting out the relationship between the parties - non-reliance upon representations made that are not reflected in the agreement - franchisee’s success not warranted but will depend on the hard work, ability and dedication of the franchisee - franchisee acknowledges that he has read the agreement and understands it - has been encouraged to seek professional legal and accounting advice - respective delivery addresses for official notices etc.)

Important note: In terms of the Code of Ethics and Business Practices issued by FASA, all franchise agreements will contain a clause referring to the disclosure document. It will be recorded that the information contained in the disclosure document is, to the best of the franchisor’s knowledge and belief, true and accurate and that no material information has been withheld by the franchisor.

Possibly related posts: (automatically generated)
What does a Franchise Agreement cover?

• Relationship Franchise Agreement - Operations Manual
• The franchise agreement
• The parties to the franchise agreement
• Some Franchise Terminology
• Open-ended franchise agreement
• What All Plans Must Cover
• Modern-day Franchising Part 2
• Preparations for franchising
• Selling the Franchise
• The FASA Code of Ethics and `Business Practices

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