Franchise Agreements

Franchise Agreement FAQ's

• What is a franchise agreement used for?

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  A franchise agreement is a contract between a franchisor and a franchisee. It manages the legal relationship between the two parties.

  A franchise agreement covers:

  • the rights to be granted to the franchisee;
  • the relevant territory where the franchisee can operate;
  • whether the franchise is exclusive;
  • outline the sales targets and development plans, and consideration; and
  • licensing of intellectual property (IP) rights and availability of trade names and domain names.
• What are the obligations for parties in a franchise agreement?

  A franchise agreement outlines each party’s duties and responsibilities for the duration of the franchise period, including end expectations.

  It often covers a range of franchise business-related topics that include but are not limited to:

  • Training and assistance
  • Marketing and advertising
  • Operations and management
  • Intellectual property rights
  • Termination
  • Renewal
  • What are the grant of rights in a franchise agreement?

  To operate the franchise during the length of the agreement, the franchisee is permitted to utilise the franchisor’s trademarks, service marks, logos, and operating procedures. The franchisor is granted the right to use these elements, but not having ownership of them.

• What are the grant of rights in a franchise agreement?

  To operate the franchise during the length of the agreement, the franchisee is permitted to utilise the franchisor’s trademarks, service marks, logos, and operating procedures. The franchisor is granted the right to use these elements, but not having ownership of them.

• Can the franchise be set up in an international location?

  Where the franchisee conducts the business must be specified. The parties should be aware of the relevant commercial, political and cultural factors, guaranteeing that the franchisee has the knowledge and resources to develop the business overseas.

• How long does a franchise agreement last?

  The franchise agreement length will be determined through negotiations. The franchisee will seek a longer duration to maximize its return on investment. Franchise agreements typically have an initial period of five to ten years, while sometimes longer in international agreements. The period length that can be agreed upon is limited in several countries.

• Can a franchise agreement be automatically renewed?

  Under certain conditions and subject to the franchisee’s performance, domestic franchise agreements may provide for automatic franchise renewal. In international agreements where the period is often longer, and the power dynamics are more equal, automatic renewal may not be as attractive from the franchisor’s perspective. Regardless, the franchisor must prepare for the possibility of a replacement franchisee.