This document outlines the key components of a master franchise contract. It defines a master franchise as granting a master franchisee exclusive rights to develop a franchise network in a defined territory. The main clauses covered are the object of the contract granting exploitation rights, territorial exclusivity for the master franchisee, requirements for the franchisee network, master franchise fees paid, and pricing policies. It also discusses the applicable law and provides a link to download a sample master franchise contract.

1. MASTER 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 Network of franchise units
3.4 Master Franchise fees
3.5 Pricing policy
4. Law applicable
5. Model Contract
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2. 1. DEFINITION
The Master Franchise Contract is a type of franchising contract whereby
a company, the Franchisor, grants another, Master Franchisee, the right
to exploit and assign franchises on an exclusive basis, creating a franchise
units network in a defined territory, usually in the country where the Master
Franchisee has its headquarters. This type of contract is very well suited for
the international expansion of a franchise business as the Master Franchisee
is very knowledgeable of the market allocated to it and has contacts to
develop a network of establishments.
There are three participants in this contract type: the Franchisor who owns
the marks, the Know-How (Franchise Handbook) and the products; the
Master Franchisee, which is going to develop the franchise business through
searching for, selecting and controlling the franchisees; and the franchisees,
who are the people who manage the points of sale.
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3. 2. PARTIES TO THE contract
The Franchisor is always a company but the Master 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.
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4. 3. MAIN CLAUSES AND SAMPLE
Some of the most important clauses in the Master
Franchise Contract are as follows:
• Object of the Contract
• Territorial exclusivity
• Network of franchise units
• Master Franchise fees
• Pricing policy
See sample Master Franchise Contract
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5. 3.1 OBJECT OF THE CONTRACT
“The Franchisor hereby assigns to the Master Franchisee, which
accepts, the right to exploit the Know-How, the marks and the
marketing of the products through a franchise units network which
will be created and developed in the territory defined in Annex of this
contract, and under the terms and conditions indicated as follows.”
“The products which are the object of this contract are those included
in Annex. Any amendment or appearance of new products shall be
periodically added to that Annex.”
See sample Master Franchise Contract

6. 3.2 TERRITORIAL EXCLUSIVITY
“The Franchisor grants the Master Franchisee territorial
exclusivity within the area described in Annex 3 of the present
contract. The Master Franchisee can establish its network of
franchise Units only within this territory.”
“The Franchisor undertakes not to set up any establishment
belonging to the ………………..[name of Franchisor] network,
either on its 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 Intellectual Property Rights described in Section IV of the
Recitals of the present contract.”
See sample Master Franchise Contract

7. 3.3 NETWORK OF FRANCHISE UNITS
“The Master Franchisee shall look for and freely select the candidates with
which it shall carry out the franchise contracts and which will form part of
the franchises network.”
“To select the candidates to be franchisees, the Master Franchisee shall take
into account the following professional and financial criteria, inter alia:.......
......................................................”
“The Master Franchisee shall allocate a geographical area by contract to
each franchisee in which it will carry out its activity exclusively”.
“The Master Franchisee shall be entitled to freely exploit one or more
franchises up to a limit of no more than .......... [3, 5, 10] in the territory
defined in Annex of this contract.”
See sample Master Franchise Contract

8. 3.4 MASTER FRANCHISE FEES
“The Master Franchisee shall pay the Franchisor a non-redeemable
Front-end fee, in respect of his appointment as Master Franchisee
of the network of the ............ [name of the Franchisor], the sum of
………………........................ [written in words].”
“The Master Franchisee shall pay the Franchisor …......……. [every
month, every quarter] a Franchise Fee equivalent to ….. % of all the
gross sales made by all the franchise Units within the network for the
same period.”
“The Master Franchisee shall make due payment for the Franchise Fee
for each period in ….. [specify the currency], at the same time as dispatch
of the aforementioned balance. The payment shall be effected by direct
bank transfer to the bank account specified by the Franchisor.”
See sample Master Franchise Contract

9. 3.5 PRICING POLICY
“The Master Franchisee hereby states that it is perfectly apprised of
and accepts the prices of the Franchisor’s products.”
“In the event of changes in product prices, for any reason, the
Franchisor will have to notify the Master Franchisee in writing of
the new prices within a period of no longer than .......... [5, 10, 15]
workable days.”
“The Master Franchisee accepts the payment conditions and the
payment period of the products supplied by the Franchisor established
in Annex of this contract.”
“The Master Franchisee shall establish according to its sole criterion
and under its sole responsibility, the resale price of the products to
Franchisee, although the Franchisor will be able to give it guidance and
offer any advice it deems pertinent.”
See sample Master Franchise Contract

10. 4. Applicable Law
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.
See sample Master Franchise Contract

11. 5. MODEL CONTRACT
In order to obtain the model agreement in
Word format and the user guide, click on:
Master Franchise Contract
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