The Franchise Agreement
Franchise agreement which is a long term cooperation agreement under which the franchisor grants the franchisee the right to use his name, his logo, slogan, trade name and trade mark. In the franchise agreement the franchisor should transfers the knowhow to the franchisee through training sessions for example. It allows the franchisor to duplicate his name and network without spending money on a new outlet, and also the franchise agreement offers the consumer the benefit of having the product or the service available for them in many outlets.
Three types of franchise agreement that exists; Production, Distribution and Service.
• Production Franchise Agreement: The franchisee manufactures the product under the control of franchisor. Example Coca cola.
• Distribution Franchise Agreement: The franchisee distributes goods under the franchisor’s name and trade mark and the franchisor manufactures the goods. Example BHV
• Service Franchise Agreement: It is the most common type of franchise agreements, it provide service like restaurants.
The franchisor’s obligation and what should be granted to the franchisee.
1) The right to use the name, logo and the trade mark which attracts clients.
2) Notify the franchisee with the engineering standards example design of shop.
3) Transferring the knowhow to the franchisee. Failing to transfer the knowhow cancels the agreement. Training duration varies from business to business 3 to 12 months. Example pizza hut training is for 6 months.
4) Continuous assistance of the knowhow is important as training is important and it should be given to the franchisee or the franchise bible. After developing and assisting the franchiser should periodically send people to train, monitor, and send information to the franchisee.
5) Before signing the contract the franchiser should provide the franchisee a sneak preview of the turnovers...
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