The typical content of a legal franchise agreement are the fees and frequency of payment, the duration and renewal, the formation and the transfer of ownership. Different types of businesses can add more content depending on the nature and needs of their business. If you are interested in franchising, whether as a franchisor or franchisee, an important document to consider is the franchise agreement. A franchise agreement is usually a complete document. Of course, the franchisor does not intend to confuse the franchisee. It is long because it specifies in detail the respective obligations, obligations and prohibitions of the Contracting Parties. Despite its length, the parties must be aware of the terms and conditions of the franchise agreement. There are two phases in creating a franchise agreement: the preparatory work and the actual writing process. The preparatory work consists of setting the fees and developing the details of the contract such as duration, extension, transfer of ownership, etc.
All this data should be fair and lead to a win-win situation for both parties. Learn more about the franchise agreement: How to protect yourself when franchising your business A franchise agreement, like any other contract, follows the three essential elements of a valid contract, namely consent, purpose, and cause or consideration. Understanding a franchise agreement based on these three requirements will help the franchisor or potential franchisee decide whether franchising is the right decision for their business. For franchisees, it is strongly recommended that all parts and details of the agreement be read, understood and reviewed prior to signing. For franchisors, all possible scenarios must be included and covered by the agreement. Overall, the details of the document should make sense to both parties. Notwithstanding the foregoing, the Franchisor and franchisee may nevertheless agree to include other terms and conditions they deem necessary, provided that they fall within the scope of the laws applicable to the Agreement. How long does it usually take to draft a franchise agreement? Franchising refers to the method of practicing and using someone else`s advanced business concept. In our previous article, it was stated that the franchise agreement is a written contract or agreement between the franchisor and the franchisee. To put it simply, a franchisor is the owner of the business concept, while a franchisee is the person who is allowed to use the business concept for consideration of the former. The franchisor grants the franchisee the right to offer, sell or distribute goods or services.
In the meantime, the drafting process usually takes about or less than a month until every detail is reviewed by lawyers and the agreement is finally signed. While franchisors can draft their own legal agreement with their legal counsel, it would be best to talk to franchise experts and consultants, as they are the ones who specialize in this issue. In terms of franchise, one of the most important legal documents is the legal franchise agreement. This document legally forges the relationship between a franchisor and a franchisee. Without them, many threats, misadventures and violations related to the company could be committed intentionally and accidentally by everyone involved. The franchisor is essentially the one who writes the document. However, the franchisee can also check this before signing. During the review, the franchisee should carefully read and understand the full content of the agreement and consult with trusted legal counsel for advice and peace of mind.
Since there is no specific law on franchising and in accordance with the DTI Bureau Order No. 10-24, Series of 2010, which is the due diligence advice that must be performed by a potential franchisee and to protect both parties, the following should be included in the franchise agreement: What should be included in the franchise agreement (FA)? The subject of a franchise agreement is the commercial format that is franchised. It is the right to use the concept, manner and system of commercial activity of the franchisor, its trademarks, its business and commercial secrets such as the recipe of a secret menu, a special ingredient in a formulation, a precise way of managing and other exclusive know-how. Therefore, the potential franchisor or franchisee should not confuse a commercial-sized franchise with a statutory or state franchise. Currently, there is no specific law on franchising. However, keep in mind that a franchise agreement is essentially a contract. Thus, it is generally subject to contract law. However, it is inevitable that they will be subject to other related laws such as the Intellectual Property Act. Indeed, the right of the franchisee, unless otherwise stated, includes, but is not limited to, the use of trademarks, service marks, trade names / company names. If the franchise agreement consists in the fact that one of the parties is a company, company law can also be used in addition to contract law. For franchisors, it is useless for their business if the data and figures in their franchise agreement are not well thought out.
Even if other companies have royalties of 3%, that doesn`t mean they should charge a royalty of 2% or less just to make their brand stand out and make it more marketable. Franchisors should think that these percentages and fees should effectively cover costs and services such as opening support, store visits, employee salaries, etc. Good franchise agreements are usually explicit with regard to the purpose of the contract. Indeed, a franchise agreement, which is a membership agreement, is interpreted against the author, who in most cases is usually the franchisor. In the event that a provision of a franchise agreement is ambiguous, our Civil Code always resolves the ambiguity vis-à-vis the franchisor. In addition, standard franchise agreements typically include a clause on the entire agreement, which states that the franchise agreement contains all the clauses agreed upon by the parties and that matters and agreements not specified in the contract are deemed to be superseded. Thus, if a particular provision is inadvertently omitted by the franchisor, it is considered obsolete. A franchise essentially means the granting of a right. In franchising in the form of a business, the right is usually granted by an entrepreneur or an individual. In a legislative or state right to vote, the right is granted exclusively by the government. Examples of legislative franchises include telecommunications franchises, radio, cable, and television franchises granted by Congress through the National Telecommunications Commission.
This also includes other utilities and amenities such as the provision of electricity, water, public transport, courier and post office. In the event that a franchise agreement covers a legally regulated activity, the franchise agreement must be understood to mean that the subject matter of the contract is limited only to the franchisor`s business format and should not be understood as including the right to carry out the respective activity. Just like a marriage, a franchise relationship between a franchisor and a franchisee works great when both parties are satisfied and happy. And an effective way to ensure this is to design, enter into and regulate a legal franchise agreement that is both fair and firm. The franchise agreement defines and describes the franchise relationship. In particular, it defines the duties and responsibilities of the franchisee vis-à-vis the franchisor and vice versa. If certain revisions are necessary, the franchisee must notify the franchisor for approval. Only if both parties accept all the clauses can a signature take place, which will formalize the partnership. The franchisee must obtain the appropriate licenses and permits for himself before carrying on the regulated activity. He may not attribute his franchisee activity to the licence granted by the Government to the franchisor.
He cannot claim that his franchisor, since he has already obtained the permits of the State, is spared from the task. The franchisee must obtain his own. Of course, given the franchisor`s experience and knowledge, the franchisee will have no trouble obtaining the necessary permits from the necessary government agencies. Alburo Alburo and Associates Law Offices specialises in business and labour law advice. For any inquiries, you can reach us at info@alburolaw.com or by phone at (02)7745-4391/0917-5772207. Your email address will not be published. Mandatory fields are marked * However, it is important to note that the franchise agreement is usually designed and prepared by the franchisor. Therefore, the franchisee is advised to consult a lawyer before entering into any type of franchise agreement. Do you know that one of the main actors or triggers of a successful business is legality? Without proper legal work, a company will not be able to initiate any form of legitimate transaction. Only if two or more people accept a certain thing can a contract be concluded. Otherwise, there is no treaty to speak of. Among the contracts that can be concluded by the consenting parties is the franchise agreement.
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