Franchise Agreement

A franchise agreement is a legally enforceable contract between a franchisor and a franchisee. The contract outlines the franchisor's expectations of the franchisee, as well as how the firm must be run. It is an agreement in which the franchisor (company) agrees to allow the franchisee the use of the brands name or system (individual or entity).
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There is no legislation that governs franchise agreements, although there are a few statutory enactments that apply. Such as

  • Indian Contract Act, 1872
  • Trade Marks Act, 1999
  • Copyright Act, 1957
  • Consumer Protection Act, 1986
  • Arbitration and Conciliation Act, 1996 etc.

Here are 10 basic provisions found in every franchise agreement in some form or another:
  1. Location/territory: The franchise agreement will specify your operating region as well as any exclusive rights you may have.
  2. Operations: This section explains how franchisees should operate their businesses.
  3. Training and ongoing support: Franchisees and their employees can receive training from franchisors. Training might take place in a corporate environment or on the workplace. The agreement would also include all continuing administrative and technical assistance.
  4. Duration: The franchise agreement's duration will be specified in the paperwork.
  5. Franchise fee/investment: In most cases, the franchisee will pay an upfront initial franchise fee in exchange for the right to use the franchisor's brand and operating system. Those expenses will be specified in detail.
  6. Royalties/ongoing fees: The specifics of the franchisor's royalty system may be seen here. Most franchisors require franchisees to pay a continuing royalty, which is typically a percentage of total sales and is usually paid monthly.
  7. Trademark/patent/signage: This section explains how a franchisee can make use of the franchisor's trademarks, patents, logos, and signs.
  8. Advertising and marketing: The franchisor will announce its advertising commitment as well as the fees franchisees would be responsible for.
  9. Renewal rights/termination/cancellation policies: The franchise agreement will spell out how the franchisee's contract may be renewed or ended. Arbitration clauses are included in certain franchise agreements. In the event of legal action, this requires the appointment of an arbitrator to examine the matter before it gets to court.
  10. Exit strategies: The resale policy varies each franchise. Some franchisors enable franchisees to sell their businesses at their convenience. Buy-back or right-of-first-refusal provisions are examples of other agreements. These allow the franchisor to repurchase the franchise at a price set by them or to match any offer made by a potential buyer.

Benefits of Franchise Agreement


How to Register/Process

An agreement for franchise is entered into between the parties. The final Agreement is drafted and signed after paying requisite stamp duty as maybe applicable.

Franchise Agreement

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Frequently Asked Questions

A franchise agreement consists of the termination clause in accordance to which the agreement shall be terminated i.e, either by notice or on completion of term.
The parties to the agreement are no longer binded by the franchise agreement and the Franchisee shall not be eligible to run the franchise until the agreement is renewed.
A franhcisee agreement may be modified in accordance with the terms of modification as agreed to between the parties in the original franchise agreement.
A master franchise agreement is an agreement entered into between the Original Franchisor and the franchisee allowing the franchisee to sub franchise the business as per the terms and conditions agreed there upon.
Franchise agreement allows the franchisor and franchisee to come into agreed terms and conditions in accordance with franchise business maybe run upon smoothly.