A franchise agreement is a legal document that comprises the rights and

obligations of the franchisor and the franchisees. It is the only official agreement
that binds both the parties together. If the franchisee has decided to take up
franchising to expand his/her business, then it is advisable to get in touch with a
legal representative to guide the aspirant through the legal procedures and
agreements. Being a novice in franchising business, one needs the help of a
supervisor with excellent expertise of the franchising model, technicalities and
other legal agreements.

Objectives of preparing the franchise agreement

A franchise agreement is prepared to achieve three elementary objectives. They are
as follows:

 It must precisely reveal the terms and conditions on which the franchisor and the
franchisees have agreed.

 It must mention the intellectual properties that a franchisor provides to his/her

franchisees, and should also ensure the benefits to both the parties.

 It should also clarify the obligations of both the parties.

The franchise agreement usually contains provisions. The points are covered in
substantial details as follows:

Franchise fee and investment: A franchise agreement must include franchise fee
to avail the rights of the franchisor’s trade mark and operating system. Apart from
the franchise fee, the franchisor must mention about the estimated amount required
to set-up the franchise business.
Royalty: The franchise agreement should mention the royalty fees. The agreement
must also include the procedure that needs to be followed to pay the royalty. This
can be paid on a monthly, quarterly or annual basis.
Training and ongoing support: One of the agreements also includes, providing of
training modules and technical and administrative support of the franchisor to the
franchisee. Also, the information regarding the location and the duration of such
training needs to covered in details.
Marketing support: In the legal document, a franchisor should reveal the
marketing commitment (if any) and what a franchisee is required to pay for the
marketing support.
Brand name, signage and copyright: It is an important part of the franchise
agreement that covers the trademark, signage, copyrights and the confidential
information of the franchisor and his/her company. This provision not just grant
relevant rights to the franchisees to use the intellectual property but also reserve the
franchisor’s right to protect the infringement of his assets.
Franchise territory: The franchise document must mention about the allocation of
exclusive territorial rights to the franchisees by the franchisor.
Modus-operandi of franchising: The franchisor must ensure the availability of
all the technical and other necessary help that a franchisee needs to run the
franchise successfully.
Duration of franchise agreement: The franchise agreement must include the
duration of the agreement.
Terms of renewal or termination of the franchise agreement: A franchisor must
state in the franchise agreement of the renewal and termination of the agreement.
Mentioning the terms and conditions of franchise renewal or cessation gives the
franchisor or the franchisee a right to take legal action in case of any infringement.
Right to resale the franchise: The franchise agreement must clearly mention the
rights of reselling the franchise on part of the franchisee. Also, if the franchisor
would be willing to buy back the franchise at a preset cost.
Clarification of laws: The franchisee and the franchisor are recommended to be
very clear with all the provisions in order to secure themselves from future
disputes. As, India lacks a franchise law therefore, it becomes more significant to
have at least a legal document that describes the rights and obligations of the
franchisor and the franchisees. As a franchisor, one must incorporate all the
relative information that can be consulted in case of any difficulty or problem.
The franchisee and the franchisor are suggested to make the franchising agreement
clear and understandable in order the avail the rights and privileges of franchising.