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The International Franchise Contract ( governs the relationship between two legally independent parties, Franchisor and Franchisee, based in different countries.

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  1. 1. INTERNATIONAL FRANCHISE CONTRACT 1. Definition 2. Parties to the Contract 3. Main clauses and sample 3.1 Object of the contract 3.2 Territorial exclusivity 3.3 Duties of the Franchisor 3.4 Duties of the Franchisee 3.5 Franchise fees 4. Law applicable 5. Model Contract
  2. 2. This is a contract for cooperation between two legally independent parties (Franchisor and Franchisee) based in different countries. The Franchisor confers to the Franchisee the exclusive right to distribute its products (or services) in establishments which are uniformly equipped and furnished, as well as the right to use industrial property rights (brands, commercial signs, trade marks), while also providing the whole Know-How (Franchise Handbook), and the technical and commercial support for distribution to be carried out correctly. The Franchisee must follow the instructions given by the Franchisor as regards the presentation, commercialization and corporate image on the authorized premises. In recognition of the services provided, the Franchisee pays the Franchisor a series of different fees (Front-end fee, sales fee, advertising fee). 1. DEFINITION
  3. 3. The Franchisor is always a company but the Franchisee can be a company or a person with experience in the business of the Franchisor. For each party, the following has to be included: • Name of company, full address and nationality. • Company type: public limited company, limited liability company, etc. • Name and position of company representative who signs the agreement as Franchisor. • Name, profession, full address and nationality of person who acts as Franchisee. • Tax ID number of both parties. 2. PARTIES TO THE CONTRACT
  4. 4. Some of the most important clauses in the International Franchise Contract are as follows: • Object of the Contract • Territorial exclusivity • Duties of the Franchisor • Duties of the Franchisee • Franchise fees 3. MAIN CLAUSES AND SAMPLE See sample of International Franchise Contract
  5. 5. “By means of the present Contract, the Franchisor grants the Franchisee, who correspondingly accepts, the right to form part of the ………………..[name of Franchisor], as a franchise, using under licence the Property Deeds stipulated in the Preamble of the present Contract as well as the Know-How of the Franchisor, according to the terms and conditions laid out in the following articles.” “Franchisor and Franchisee are legally and financially independent Parties. The present Contract does not confer any sort of relationship between them other than that which is the object of the franchise.” 3.1 OBJECT OF THE CONTRACT See sample of International Franchise Contract
  6. 6. 3.2 TERRITORIAL EXCLUSIVITY “The Franchisor grants the Franchisee territorial exclusivity within the area described in Annex 3 of the present Contract.” “The Franchisor undertakes not to set up any establishment belonging to the ………………..[name of Franchisor] network, either on his/her own account or through third parties by means of franchising or any other type of contractual arrangement which involves the use by a third party of the Franchisor’s Know-How or the Industrial and Intellectual Property Deeds described in Section IV of the Recitals of the present Contract.” See sample of International Franchise Contract
  7. 7. “The Franchisor shall provide the Franchisee with the authorized products [or services] and shall ensure that such products [or services] are delivered to the Franchisee in a maximum period of ….. days of receipt of the order.” “Any supply of the authorized products [or services] effected by the Franchisor shall be subject to the general sales conditions as described in Annex of the present Contract, which may be modified by the Franchisor at any time during the term of the Contract.” “The determination of the range of products [or services] to be supplied to the ................. [name of Franchisor] network shall be the sole responsibility of the Franchisor in every instance.” 3.3 DUTIES OF THE FRANCHISOR See sample of International Franchise Contract
  8. 8. “The Franchisee shall offer an appropriate organization of product sales, and an after- sales service where necessary, including all the resources and staff required to ensure the fulfilment of the obligations arising from the present Contract.” “The Franchisee must provide the Franchisor, at least ..... [days or months] in advance, with an estimate of the product orders (s)he is to place during the following ….. months. The Franchisor is under no obligation to supply products [or services] to the Franchisee when the order exceeds the estimate for the same month by more than 5%.” “The Franchisee may not acquire the products [or services] from any other source than the Franchisor or the supplier(s) that (s)he appoints, and consequently may not sell any products on the premises which the Franchisor has not authorized.” 3.4 DUTIES OF THE FRANCHISEE See sample of International Franchise Contract
  9. 9. “The Franchisee shall pay the Franchisor a non-redeemable Front- end Fee to the .......… [name of Franchisor] network the sum of ………………........................ [written in words]. The Front-end Fee is to be paid at the time of conferral of this Contract, and the appropriate invoice shall be supplied.” “The Franchisee shall pay the Franchisor …......……. [every month, every quarter] a Franchise Fee equivalent to ….. % of the gross sales for the same period.” “The Franchisee shall pay the Franchisor each ….... [month, quarter] an advertising fee equivalent to ….. % of his/her gross sales for the same period.” 3.5 FRANCHISE FEES See sample of International Franchise Contract
  10. 10. International Law standards are not applied to this type of Contract. The parties are free to submit any conflicts regarding the agreement to International Arbitration or to the Laws of the country of one of the parties. They will normally be subject to the Laws of the Franchisor´s country. 4. LAW APPLICABLE See sample of International Franchise Contract
  11. 11. In order to obtain the model contract in Word format and the user guide, click on: International Franchise Contract 5. MODEL CONTRACT