Legal aspect of business-Term-V

DRAFTING A FRANCHISEE
AGREEMENT GROUP 8
Ashish Agarwal (20EMP1-24)
Bipin Negi (20EMP1-24)
Sumit Jha (20EMP1-24)
Vikram Rohilla (20EMP1-24)
GROUP
Ashish Agarwal (20EMP1-01)
BCM Reddy (20EMP1-07)
Bipin Negi (20EMP1-08)
Dewanshu Kumar (20EMP1-10)
Hemwati Nandan (20EMP1-14)
WHAT IS FRANCHISE?
Business Format Franchising contains 4 essential elements

The Franchisor allows the Franchisee to use a name which is associated

with the Franchisor

 The Franchisor exercises continuing control over the Franchisee.

 The Franchisor provides assistance to the Franchisee

The Franchisee has periodically to make payments to the Franchisor.

TYPES OF FRANCHISE?
Mainly of two types

Product distribution franchises –licences TM & logo

Franchisee not provided with entire system for running business.
Eg: soft drink distributors, car dealers and gas/petrol stations

Business format – replicate business format. Most common form of

franchise –Franchisee uses/replicates the complete method to conduct the
business.
Eg: fast food, retail, restaurants, business services and lodging
 Key components covered
The Franchise Agreement is the legal document that governs the franchisee/franchisor
relationship. There is no standard format for a Franchise Agreement because the terms and
conditions and operations vary from franchise to franchise and industry to industry.
In general, Franchise Agreements cover the following main provisions:

Assigned territory

Franchise Agreement will designate the territory in which Franchisee shall operate and whether
or not we have exclusivity rights.

Operating protocol

Describes in detail all the services which the franchisor will provide including, but not
limited to, training, operations support, advertising, etc.
Obligations & Duties of the Franchisee --Describes the franchisee’s responsibility including,
but not limited to, training requirements, Sales of services, record-keeping, etc
 Key components covered
Restrictions.
Describes any restrictions placed on the good and services offered, including: - Required
quality standards - Approved suppliers - Approved advertising - Hours of operation -
Pricing
Also includes the NON-COMPETE clause which in our case in 3 years
Conflict of interest
Sales Representative warrants to Company that it does not currently represent or promote any
Services that compete with the Company's Services

Fees & payments

Describes the mandatory initial franchise fees- and what the franchisee receives for that fee-
Advertising / marketing fees, what it is based on and when is it due & other fees like Royalty fee.
It also includes the commissions agreed upon

Trademark, patent, and signage use

This provision covers how franchisee can use the franchisors trademark, patent and
signage.Lists trademarks, service marks, and/or logos the franchisee is entitled to use. It also
lists the restrictions on its use by the franchisee
 Key components covered
Advertising.
The franchisee will acknowledge its advertising commitment and what fees franchisees are
required to pay towards those costs

Duration
Duration of the Franchise Agreement states the length of the agreement.Shows how long it lasts, rights of
the franchisee to renew
May also show rights of the franchisor to purchase the franchise before expiration

Confidentiality
To maintain the confidentiality of services & product Franchisee needs to acknowldge to the the
confidenatily conditions laid by the Franchisor

Training and/or ongoing support provided by the franchisor

Each franchisor has its own training program for franchisees and their staff, which can include
training done at the franchisees location or at the corporate headquarters or a combination. Most
franchisors offer ongoing support including administrative & technical support.
 Key components covered
Renewal rights and franchisee termination/cancellation policies

These provisions deal with how the franchise can be renewed or terminated. Some franchisors
have an Arbitration Clause in the Franchise Agreement.
Agreement can be extended on mutual agreemnet of both parties

Governing law & Jurisdiction

To safeguard the interests of Franchisee this clause provides the remedy for any
dispute or wrongdoing at both ends , hence all disputes which might arise in
connection with our agreement shall be settled in an amicable way in
the first place.
Limitataion on liability
It safegaurds te franchisee from the liability of damages, compensation,
reimbursement , loss of profit , expenditure or commimtment in the event of
termination by either party in accordance to the provisions of the Agreement.
 Legal aspects covered….
Section 2(h)

A contract has been defined in Section 2(h) as "an agreement enforceable by law"
Hence we have worked upon the enforceability or legal obligation of the agreement
in the key components of agreement & has intention to create legal relations

Section 2(e)
It states that "Every promise and every set of promises, forming the consideration
for each other, is an agreement." hence each clause & section has clearly states
promises that franchisee agrees to fulfill & what are its expectations from the
franchisor

Sec. 29
“Wording of the agreement must be clear and not uncertain or vague.
Agreements, the meaning of which is not certain or capable of being made certain, are void”

Hence care has been taken to make the terms of agreement quite clear & precise to
make out certain meaning
 Legal aspects covered….
Section 56-Possibility of performance

All the conditions & terms put in agreement are such that there possibility of performance of
the agreement & can be enforced by law

Section 2(a)
There is an expression of the willingness by us (franchise) to do or to abstain
from doing something.
(i) It is directed to the another person (Franchisor).
(ii) with a view to obtaining the assent of the other person (Franchisor) to such act or abstinence.

Section 11
The agreement is not directed to a mi nor, Person iof unsound mind or a disqualified person
by status.
 Legal aspects covered….
Section 2(d) Consideration
In the agreement at the desire of the franchisor, the franchisee has agreed to do & abstained
from doing, or promises to do or abstained from doing something, resulting in consideration
for the promise

Section 18 Misrepresentation
Utmost care has been taken to not make the inaccurate representation to avoid any inaccuracy due to
Unwarranted Assertion
Breach of Duty
Innocent Mistake

Section 27
Agreement in restraint of trade is void, hence any condition or outcome of the breach of
contract which is in restraint of trade shall be considered void.
 Legal aspects covered….
Section 30 Wagering agreements
Utmost care has been taken to include any term which are in accordance to wagering, i.e
promise to pay money in case of an uncertain event in which neither party has interest nor
have any control

Section 31 Contingent contract

Elements of contingent contract have been adopted in many key components of the
agreement,contract to do or not to do something, if some event, collateral to such contract does
or does not happen

Section 37 Fulfilment of the contract

The Franchisor & the Fr’see are bound to either perform or offer to perform their
respective promises in the agreement, unless such performance is dispensed with
or excused under the provision of the Indian Contract Act.
 Legal aspects covered….
Section 38 Offer of performance
Agreement clauses has been made unconditional at a proper time and place &
under such circumstances that the Franchisor may have a reasonable opportunity for inspection

Breach of the contract

In case of the breach of contract by Franchisor , remedies & the arbitration clauses
has been taken care in case any dispute arises