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What information is included in a franchise contract?
The franchise contract sets out the terms of the agreement between the franchisor and franchisee and will usually be a largely non-negotiable, standard form contract that the franchisor uses for all of the franchisees in its network. In the UK there are no hard and fast rules regarding what provisions need to be included in the contract, but it will commonly include provisions covering the following:
Franchisee’s rights. If the franchisee is given the right to operate either exclusively or non-exclusively in a territory, or just a right to operate from particular premises, and which trade marks and other intellectual property rights of the franchisor is the franchisee entitled to use.
Term. The period of time the contract is intended to last for, if it is possible to renew the contract and any conditions attached to the renewal.
Franchisor’s obligations. Sets out the services, products and training that the franchisor will provide to the franchisee.
Franchisee’s obligations. These will usually include buying all products, fixtures/fittings and equipment from either the franchisor or specified suppliers; following the franchisor’s system; providing management accounts and sales figures to the franchisor on a regular basis; and providing evidence of adequate insurance protection.
Fees payable to the franchisor by the franchisee.
Right to sell the franchisee’s business.
Contract termination.
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