What is the importance of getting franchise agreement?

A franchise agreement is a kind of legal agreement on a document that is entered into by two parties, one being the franchisor and the other being franchisee. This is done for opening and operating a franchise unit. And it’s usually a single unit. However, if the franchisee wants to open additional units then separate agreements for each unit will be required. These franchise agreements vary greatly with respect to the franchisor. But there are certain common elements in it, which are given below:-

Elements of a Franchise Agreement

1. Details of the franchisor and the franchisee.

So, basically, this element involves details and legal authority of a person who is entering into the franchise agreement on behalf of the franchisor and the franchisee. Mostly the franchise agreement is between two legal entities like two companies and in such situation, the directors or the authorized officers by a board resolution will be the one to sign on an agreement. Both on behalf of their respective companies.

Franchise Fee & Consideration

The terms of franchise fees, its deposits, and royalties along with the advertising fees and other changes are mentioned in lengths in a separate section. The mode of payments and the due dates of those payments are also mentioned in detailed lengths. It is important to ensure these terms of franchise fees are mentioned in the franchise agreement and are as per the basic agreement and understanding between the two parties that is the franchisor and the franchisee before both the parties sign the final franchise agreement.

Business Operations

One of the biggest assets in a franchise agreement is that the franchisor is involved and helps with the operations of the units of the franchise. These are based on their past experience and their expertise. Now all the franchise agreements are supposed to contain information regarding what level of support will be provided by the franchisor and what responsibilities will be taken by the franchisee.

Following are some of the covered major areas of a franchise agreement:-

• The details of what goods and services will be given by the franchise.
• The mandatory obligation to purchase goods and/ or services exclusively from the franchisor.
• The Mandatory obligation for operating the franchisee unit which will be as per the standards of operations that are fixed by the franchisor.
• The Mandatory obligation of maintenance of bank accounts and the other details that are as per the franchisors requirement.
• The right of the franchisor for inspection of the unit at the regular intervals.

Governing Law and Dispute Resolution

Mentioning governing laws and jurisdiction in the document is a good practice. In case of the franchise agreement that’s being held between any Indian entity and any foreign entity then both the parties to the franchise agreement can designate the law of a foreign country and then submit it to the jurisdiction of a foreign Court, Be it exclusive or non-exclusive provided such a court has inherent jurisdiction over the dispute.

So these are some of the elements to include in a franchise agreement and more could be added. But the above mentioned are the base of this agreement. We at Enterslice are the renowned organization where we have hired many professionals who have years of experience in handling the legal processes. You don’t need to hesitate a bit in contacting as we can help you with the accurate procedure of Franchise Agreement anytime when you reach us. We have provided our phone number as well as the email address on our website, you can contact our representatives through that. We are 24/7 hr available at your end to assist you in a proper way.

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