Franchise Contract

Franchise contract

The franchise contract is a legal agreement between the franchisee and the franchisee, and it is the agreement between rights and obligations between the two parties.

In recent years, the development trend of franchising in China is getting hotter and hotter. People in the industry are eager to know the contents of the franchise contract, so as to know how to protect their legitimate rights and interests when concluding a franchise contract.

Because the franchise contract is a contract made by a franchisor with a number of licensees, and the franchisor wishes to cooperate with each other, he hopes that the contract concluded with the different franchisees can be consistent in form. Generally speaking, the franchisor and the franchisee adopt the standard terms provided by the franchiser in the setting up of the franchise contract.

Next, let's give a brief introduction to the sample of franchise contract of a famous international chain enterprise.

This is a sample of franchise contract for catering industry.

The first part of the sample is about some basic facts, including the basic conditions of the franchisee and the franchisee, the time and place for signing the contract, and the overall commitment made by the franchisee to the franchisee.

Of course, different contracts will have different styles. In order to emphasize the solution of disputes, the sample will put the general principle of dispute settlement in the statement of the basic facts.

The body part of the sample is twenty agreements.

1, the first is the agreement on the initial royalties.

The royalties for the first phase are specifically divided into standard fees, discounts for additional restaurants, delay fees, subsidiary store fees, additional fees and pfer fees for new franchisees and new franchisees.

The 2 and second stipulations are royalties payable on a regular basis during the duration of the contract.

The royalty payable on a regular basis is usually determined as a percentage of sales.

The 3 and third stipulations are about franchisees granting certain rights of the franchisee.

Such as the right to use the franchisor's management system and operation manual, the right to use the improved technology and operation information in the franchisor's management system, and other limited use of the franchisor's brand.

The 4 and fourth stipulations are for franchisees to provide some support (such as training, consultation, assistance and guidance) to the franchisee.

The 5 and fifth stipulate the obligations of the franchisee.

A total of 15 paragraphs are as follows:

The first paragraph specifies the lease of the premises.

The business premises can be rented by the franchisor to the lessor and sublet to the franchisee, or by the franchisee directly from the lessor.

If the former method is adopted, the owner's use of the business premises only relates to the rights and obligations of the franchisee and has nothing to do with the owner. If the franchisee strictly undertakes the sublease contract, if the owner and the franchisee have any disputes arising from the lease contract, the owner will be liable for damages to the franchisee. If the latter way is adopted, the use of the premises will only be related to the rights and obligations of the owner. If the franchisee violates the lease contract and causes the owner's prosecution to involve the franchisor's brand and the franchisee suffers losses, the franchiser may ask the franchisee for the corresponding compensation.

The second paragraph stipulates that the business activities of the franchisee shall always abide by the provisions of laws and regulations, handle all necessary procedures and bear the costs, observe the specifications, standards and procedures of the operation manual requirements and recommendations, and make timely adjustments and modifications with the updating and improvement of the operation manual, which conforms to the franchisor's quality control standards; and shall not disclose or allow others to copy the contents of the operation manual.

The third paragraph deals with all taxes and charges arising from the business activities of the franchisee, and the insurance of some insurance items according to the requirements of the franchisor.

The fourth paragraph stipulates that a permitted person shall not engage in any other same or similar business activities directly or indirectly during the duration of the contractual relationship, and the amount of compensation payable in violation of this provision.

The fifth paragraph provides for the payment of royalties.

The sixth paragraph stipulates that the franchisee shall report the sales situation to the franchisee at the agreed time, and record sales and operation in the system of the franchisee according to the prescribed way.

The seventh paragraph agrees that the franchisee has the right to check the operating conditions of the franchisee and check and record all the records of the franchisee without prior notice.

The eighth agreement provides punitive measures for the permitted sales of the underwriters.

The ninth way of paying the advertising fee.

Advertising fees are not a simple problem in franchising.

Neither franchisees nor franchisees are willing to take risks of advertising investment.

It is hard to say if the franchisee pays the advertising fees alone, and the number of people who are allowed to be allowed, and whether each of the franchisees can provide quality and quantity services without affecting the advertising campaign. Moreover, the amount of advertising fees is huge, so that the franchisee will bear the difficulties alone; if the franchisee is allowed to bear the advertising fees, the franchisor's brand will be publicised, the investment can be paid, whether it can play the promotional effect and the return will be hard to say. Sometimes, even the value of the franchisor's own brand is not high enough to make advertising investment a waste, so if the franchisee can bear the advertising fee, they will also have doubts.

In this contract, a two or two plan is adopted by the franchisor and the franchisee to establish an advertising fund account. The authorized person will draw the agreed percentage from the weekly sales volume as the advertising fee to the advertising fund account, and the specific advertising method is determined by the franchisor based on the amount of the advertising fund account with advertisers.

In this way, franchisees and franchisees do not have to prepare large amounts of funds to advertise in advance. Moreover, the franchisee has also adopted a way that does not require capital nor risk.

If the business condition of the franchisee is good, the advertising cost will be correspondingly more, otherwise less.

However, the problem with this approach is that if the franchisee diverted some or even all of the funds from the advertising fund account for it, it would indirectly increase the fees for the franchisee's regular franchise, and would undoubtedly infringe upon the interests of the franchisee.

In order to solve this problem, the franchisee may agree with the franchiser in the contract to supervise the financial supervision and management system of the advertising fund account. Once the franchisor violates the system, the franchisee has the right to suspend the payment of the advertising fund, and the franchiser should return the funds not used for advertising and publicity to the franchisee account.

The tenth paragraph agrees that the permitted person shall not use the brand logo of the franchisor together with the word "sale".

The agreement seems insignificant, but in fact it is not.

If consumers mistakenly believe that the franchisor owns the brand because of poor operation and must be sold, it will inevitably affect the goodwill of the franchisee, thereby causing losses to the franchisee's intangible assets.

The eleventh paragraph agrees that all payments made by the franchisee must be made in time.

Such regulations are designed to avoid the possibility that a person may be involved in debt disputes due to arrears or be penalized for tax arrears, thereby damaging the goodwill of the franchisee.

The twelfth paragraph is about the agreement of the franchisee on the management and operation in accordance with the stipulations in the contract and the operation manual.

The thirteenth paragraph agrees that the franchisee shall use the franchisor's brand only for the purpose of running a restaurant, and shall not use the franchisor brand for any purpose other than a restaurant.

The 6 and sixth stipulations are about the change of business premises.

The main requirement is that the franchisee should obtain the consent of the franchisee before changing the business premises.

The 7 and seventh stipulations are about the time limit for the contract and the extension of the contract before the expiration of the term.

The 8 and eighth articles are about the termination of the contract and the stipulation of conservative business secrets.

A total of 6 paragraphs are stipulated as follows:

The first paragraph and the second paragraph are all specific cases where the franchisee has the right to terminate the contract (for example, all kinds of procedures required by the franchisee not to engage in business activities, low reported sales, arrears of franchise fees, etc.).

The third paragraph stipulates that after the termination or expiration of the contract, the franchisee shall not retain the brand characteristics of the franchisee in his restaurant, nor shall he continue to use the franchisee's management system.

The fourth paragraph stipulates that within 1 years after the termination or expiration of the contract, or within 1 years after the pferee's contractual rights and obligations, the franchisee shall not participate in any other franchisee's other restaurant activities in any area.

The fifth paragraph agrees that the franchisee should keep the trade secrets of the franchisee and confidentiality of specific information that does not belong to the trade secret.

The sixth paragraph stipulates that after the termination or expiration of the contract, the communication numbers, contact addresses, URLs, domain names, etc., which are used by the franchisee for the purpose of operation during the duration of the contractual relationship, shall be returned to the franchisor.

The 9 and ninth articles are about the consent of the pferee.

The consent of the franchisor shall be obtained from the pferee.

For franchisees with high value brands, the original willingness to grant franchisees to the franchisee was mostly examined and considered for the qualification of the franchisee. They would not grant their franchising rights to others simply to obtain a short-term franchise fee, because once the unqualified franchisee left a bad impression on the consumers due to poor management, the loss of intangible assets suffered by the franchisee is difficult to estimate.

Therefore, franchisees often agree with the franchisee about the pfer of the contractual rights and obligations in advance. If the franchisee is required to assign the rights and obligations of the contract to the person who meets the qualification requirements and can immediately replace his own restaurant, or the franchisee should ask the assignee to participate in the training of the franchisee and the franchisor's evaluation and consent, the franchisee will be able to contract the rights and obligations.

However, there is one case worth noting: if a natural person dies or a mental illness is permitted within the term of the contract,

The 10 and tenth clauses are detailed agreements for settling disputes.

The ways to settle disputes include consultation, mediation, arbitration and litigation.

In franchising contracts, franchisees prefer to negotiate, conciliation and arbitration to settle disputes rather than litigation.

Because many franchisees have well-known brands and have great influence in the society, every move is easy to be publicized by people.

If there is a lawsuit, especially if a number of franchisees jointly sue the franchiser, no matter how specific the case is, it will certainly attract people's attention.

If miscommunication is made before the court has made a judgement, it may leave more or less a bad impression on a part of the public.

In the three ways of negotiation, mediation and arbitration, the franchisor also emphasizes the settlement of disputes through consultation and mediation, because the franchisee is a franchisee based on the agreement between the format text and the consent of the franchisee. If the individual is subject to a breach of contract, the franchisee will only be able to solve the problem with the franchisee alone, but if the franchisee violates a particular clause and is subject to arbitration by a number of franchisees, the franchisee will easily be in trouble.

However, if a franchiser emphasizes negotiation or mediation too much, he will sometimes be hard pressed to get too high a requirement.

Therefore, since it is not willing to choose a lawsuit, the arbitration clause is an essential clause in the franchise contract. Only effective arbitration clause can fundamentally exclude the possibility of entering the proceedings.

The choice of the place of arbitration should not be generalized.

For example, in a franchise contract, the franchisee is a foreigner, and the franchisee is a Chinese. If he chooses to arbitrate at the place where the franchisee is located, the franchisee will be liable for the breach of contract when the franchisee breaks the contract, which will be at a disadvantage. However, even if the franchisee breaks the contract, even if the franchisor brings up arbitration in his country and makes a ruling by the person who is absent from the contract, it will be difficult to carry out the execution in the current reality.

Then the choice is made at the place where the person is permitted.

The 11 and eleventh stipulations are about the independent effect, notice and delay payment of contract terms.

The 12 and twelfth stipulations are about the contract text and text.

The 13 and thirteenth articles are about the application of the law.

With regard to the application of the law in franchise contracts, if both parties are of the same nationality, the law applicable to that country is more appropriate.

How should the parties be applied to different nationalities?

The 14 and fourteenth articles are about the agreement that the franchisee can not conclude another franchise contract with others.

The 15 and fifteenth stipulations are about the use of the language used by the franchisee in the course of the operation of the restaurant.

Many specific business activities in franchising, such as account pactions, sales records, training programs, business status reports, notices, etc., involve both the participation of franchisees and the participation of franchisees.

For example, when a franchisor's native language is English, the franchiser may not be willing to incur high plation costs for many of the recipients. He will therefore ask for the plation fee when the recipient can not communicate in English.

The 16 and sixteenth articles relate to any employee, agent, representative, subsidiary body who has been confirmed by the franchisee without giving any statement to the franchisee.

The 17 and seventeenth articles refer to any claims made by any employee, agent, representative, affiliate of the franchisor who have not committed to the franchisee.

The 18 and eighteenth articles are about the agreement between the franchisee and the franchisee about the irresponsible compensation for each accidental loss (such as loss caused by force majeure, losses caused by a restaurant's booing, fighting or robbery).

Generally speaking, accidental loss occurs only in the place where a person is allowed to operate, but when a person's business premises happen accidental loss, such as fire or man-made destruction, it will cause consumers to feel fear about the place of operation, but sometimes the franchisor's brand will inevitably be linked to the events that happen in the operating place, so it will also be harmful to the franchisee.

The 19 and nineteenth articles relate to the promise and understanding of the contract.

The 20 and twentieth articles are about the promise of a promise not to involve other representations of the contract and its annexes.

Of course, the franchise contract is not uniform. The introduction of the above contract can only be used for reference.