What is a Franchise Agreement?
It is defined as a contract that is a legal binding between a franchisor and a franchisee.
Many franchise owners are daunted by the franchise agreement, but the contract is never one-sided just because the franchisor produces or drafts the document i.e. franchise agreement. A franchise agreement describes the role every party to it in the agreement. It tries to cover every situation between the parties and in the case of dispute arise, how that issue will be resolved.
- Brand Recognition
The name or brand recognition may be the best reason for buying into a franchise or entering into the franchise agreement.
- Managerial Assistance
When one is doing business with a respectable and reliable and trust worthy franchise, it's in one's interests for that person will succeed.
- Quality Control
There is a quality assurance for all kinds of goods dealt. Being a franchise ensures that one will rarely have to worry about the quality or consistency of products or services.
- Higher Success Rates
The success rate for franchise-owned businesses is considerably better than that of many other independent businesses.
- Opportunity for Growth
Many franchisees operate out in multiple locations. That kind of growth opportunity is hardly found with independent start-ups.
- Operating Practices
The processes are often spelled out in the franchise agreement. As it is already full fledge working and set up.
The franchise agreement explains all the costs involved in acquiring the franchise. It will explain the fees and royalties for which the franchise operator is responsible.
Frequently Asked Questions
The term “Franchise Agreement” denotes a legal document or a contract entered between a franchisor and franchisee.
The main purpose of a Franchise Agreement is to act as a legal document for the transaction where a well-established business decides to give its name, brand, operational model to another party.
The term “Franchisor” denotes a well-established business that decides to give its name, brand, operational model to another party.
The term “Franchise” denotes the person in favor of whom a well-established business decides to give its name, brand, and operational model.
The facts to consider are prior experience, outcomes of marketing programs, earning expectations, etc.
The term “Franchising” denotes the method of distributing products or services.
The main benefit of a Franchise Ownership or Model is that it provides easy access to an already established product.
The term “Master Franchise Agreement” means an agreement in which a franchisor grants the right for a particular country, region, or continent. Therefore, the main aim of a Master Franchise Agreement is to offer a full range of products and services of the franchisor.
The key laws are the Indian Contract Act 1872, Competition Act 2002, the Consumer Protection Act 1996, and Foreign Exchange Management Act 1999.
The things to consider before signing a franchise agreement are inspect about the franchisor, take proper advice from the experts, check financial statements, calculate the cost involved, previous litigations, etc.
FEMA 1999 comes into action whenever there is any involvement of Foreign Currency, or Foreign Assets. That means it helps the government in managing the franchisee of the foreign brands.
An individual can research and invest in a wide range of international and national franchise opportunities, such as Agencies, Distributorships, Dealerships, and Existing Franchises on Sale.
The different types of Franchise Agreement applicable in India are Single Unit Franchise Agreement, Multi-unit Franchise Agreement, and Master Franchise Agreement.