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3. Franchise Agreement

4. An established business for purposes of
expansion agrees to provide its brand,
goodwill and other required support to assist
another party to set up and run the business
in exchange for some charges and part of the
revenue which is generated. In such
circumstances, a legal document is required
which declares all the terms and conditions
acceptable to all the parties and the rights,
duties and obligation of each party along
with the number of profits to be shared.
Such an agreement is called the Franchise
Agreement.
Franchise Agreement

5. Development agreement: The development agreement only provides for the development
of the franchise. After the development a separate agreement needs to be executed to
operate the store.
Basic Franchise agreement: After the development, in order to operate the business this
agreement is made by parties. It is necessary to have exclusivity clauses in the franchise
agreement so no other stores of the same brand are operated within a preferred distance
from the store.
Sub-Franchise agreement: This agreement is made in circumstances where the franchisee is
unable to operate the business on a full-time basis or wants to outsource the operations of
the franchisee.
What Are The Different Types Of Franchise Agreements?

6. What are the major elements of a franchise agreement?
1. Initial Fees
2. Investment
3. Product/Service
4. Finances
5. Obligations of Franchisor
6. Obligation of Franchisee
7. Exclusiveness
8. Intellectual Property Rights
9. Agreement Period
10. Franchise Fees
11. Termination

7. Term And Renewal
• Fees and royalty clause
• Proprietary marks
• Confidentiality clauses
• Training
• Duty of Franchisor
• Duty of Franchisee
• Default and Termination
• Advertising
• Dispute resolution
Relevant Clauses In A Franchise Agreement
Franchise agreement clauses differ from business to business. There are similar aspects which these
agreements address. They are:

8. Personal Details: The franchise agreement must contain the full details and legal authority of
the parties.
Consideration: The agreement must state
the number by the party, the royalty, deposit,
charges, mode of payment,
payment date, etc.
Use of intellectual property: Maximum franchise
agreements have clauses that require the franchisee
to notify the franchisor in case of trademark
infringement.
Elements In A Franchise Agreement

9. Details of business operations: The details of
goods and services which are to be provided by
the franchise, right of franchisor to inspect at
any time .
Governing law: It is another very important
aspect i.e. to mention the governing law clause it
helps in making sure as to which law would
govern the parties under this agreement. In the
case of foreign entities and Indian entities
entering the agreement, it assists in
understanding which country’s law would have
governance.

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