A franchise agreement incorporates the rights and obligations of the franchisor and franchisee to license and sell a company’s intellectual property and licensing rights. Examples of businesses that use franchise agreements include: Convenience stores. Fast food and chain restaurants.
We shall be extending our support at the initial consultation, draft the objects and name selection for the company, and file the necessary application for incorporation and regular follow-up with the ROC until the certificate of incorporation is issued.
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A franchise agreement is the master legal document that sets forth the rights and obligations of the two main parties to a franchise: franchisor and franchisee.
In legal terms a franchise agreement is a license from the franchisor to the franchisee. A license simply means one party gives permission to another party to do something or use something of value. In the case of franchising agreements, this means:
Although the definition of franchise agreement is simple enough, the documentation can be complex.
A typical franchise agreement is 25 to 30 pages long. After attaching all exhibits and addenda, the final agreement can be two or three times as long.
As a franchisor your franchise agreement will serve as the primary and most important legal document that will govern and define the legal relationship with your franchisees. Within your franchise agreement you will be granting your franchisees the legal right to establish and develop their franchised locations and, in turn, the franchisees will be undertaking the obligation to establish and maintain their franchised operations in accordance with the mandates of your system and to pay to you certain on-going fees.
An issue that comes up extremely often relates to whether or not franchise agreements are negotiable. The answer is that they are negotiable provided that the negotiated changes are based on a request of the franchisee and to provide the franchisee with more favorable terms and rights but not less favorable terms or rights. While franchise agreements are typically negotiated and are frequently modified, the modifications are most commonly of a limited nature as franchisors do and must insist on uniformity within its franchise systems. Franchisors should never negotiate or modify structural items like initial franchise fees and royalty obligations.
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