A franchise normally takes place where a successful business establishes a system that has an efficient operation of that business and is considered to be a unique and effective system. This may be a petrol station, or restaurant, or any other type of other operation of a business.
Franchise agreement
Most franchisors and franchisees enter into a franchise agreement in order for both parties to agree to the franchise. The agreement sets out the terms and condition of the franchise. The franchise agreement will normally include a franchise fee which is payable either on a monthly basis or an annual basis.
The franchise agreement will also include minimum terms. Such minimum terms include either the minimum supply threshold from the franchisor where the franchisee must obtain the supplies of the business from the franchisor not less than the minimum threshold within the specified period.
Most franchise agreement will also require portion of the turnover of the business to be paid to the franchisor by the franchisee. This will be in addition to the franchise fee.
Supply agreement
Because most franchise agreements will depend on acquiring supplies from the franchisor, a supply agreement will almost always accompany a franchise agreement.
The supply agreement sets out the type of supply that is required by the franchisee in order to operate the business. The franchisee will also have to pay for those supplies in addition to the franchise fee as well as the turnover portion payable to the franchisee.
Most franchisees will operate the business using the trade name and the trademarks of the franchisor.
Trademarks
A franchise agreement will allow the franchisee use the name of the franchisor in the operation of its business. This will be part of the franchise agreement and will be covered by the franchise fee payable by the franchisee.
The franchisee will not necessarily own the business name or the trademark but will be able to use the business name or the trademark under a licence.
Lease
If the franchisee requires acquiring a lease, the franchisee must secure a lease prior to entering into a franchise agreement.
How can we help you?
If you are operating a franchise or you wish to acquire a franchise as a business, contact our office for a consultation.
