Two main types of franchising can be detected by the degree to which the franchisor gives the franchisee the right to use its intellectual property. This is the pre-package, which is generally described as a deductible tax and is paid to obtain the licence or deductible. The breakdown generally includes the cost of installing the outlet, training costs, legal fees and the amount of the overvaluation. The franchise agreement is essentially a legal document between the franchisor and you (the franchisee). This is a legally binding agreement. It explains in detail what the franchisor expects of you as a franchisee, in the way you operate every facet of the business. There is no standard form of the franchise agreement, as the terms and methods of the business vary considerably from different franchises, depending on the type of business. Definitions should include trademarks, copyright, clothing, know-how, trade secrets and other intellectual property rights. It should also contain a description of the franchise activity.
Since the franchisor allows the franchisee to use its intellectual property, the definitions should also specify the intellectual property used in which area and for which period. The following excerpt is from The Franchise of Rick Grossman Bible. Buy it now on Amazon Barnes and Noble iTunes IndieBoundThe franchise agreement is the contract between you and the franchisor, but it is not a “standard” or “form” agreement. The format of the contract differs from one franchise system to another. Under EU competition law, which applies to vertical agreements between companies (including franchise agreements), a non-competition obligation includes any direct or indirect obligation that encourages the purchaser not to manufacture, buy, sell or resell goods or services that compete with contract goods or services (see full definition of Article 1 (d) vertical category exemption regulation (VBER). Exclusive distribution agreements, merger agreements and franchise agreements are typical examples of agreements, including non-compete agreements. If this is the case, according to the VBER, parties to a vertical agreement can invoke a non-competition obligation of no more than five years and can be assured that such an obligation is in accordance with EU competition law. The franchise agreement will go into detail to learn more about the franchise relationship. It will contain detailed information on proprietary statements and outline things like website maintenance and upgrade requirements. For example, the franchisor must collect separate and independent financial results that are not diluted by other business activities, as this information can serve as a business development tool for new franchisees in disclosure documents. In this agreement, unless the context requires something else, the following terms and formulations have the meaning attributed to them: all franchise agreements require that the franchisee receive insurance covering its activities. In all cases, each franchisee`s insurance policy requires the franchisor to be designated as “additional insured,” meaning that the franchisor has the same coverage as the franchisee, although the franchisor does not pay for the coverage.
The parameters in which they work must take into account specific challenges. Franchisors, who agree to exploit their concepts and brands in co-branding and group franchise models, are careful in choosing the partners with whom they are linked and must develop an appropriate infrastructure to use them. A prudent franchisor will integrate these aspects of its business as part of its concept and expansion strategy, not just as a way to accommodate a single franchisee.