ARTICLE : MASTER FRANCHISE AGREEMENT
MASTER FRANCHISE AGREEMENT
Franchising is a keytool which improves your brand’s royalty and makes your identity in the world. This is the reason behind why KFC and Dominos pizza is popular worldwide. That identity was achieved by franchising their brand to different parts of the world by way of franchise. Furthermore, To make this process furthermore effortless, Master Franchise were appointed. It benefits both parties to earn the profit among themself. For this mutual business growth the franchising agreement which makes the way for it.
MASTER FRANCHISE AGREEMENT :
A master franchise agreement is one type of the franchising agreement. In which the brand or the company gives all the control to the master franchisor in the specific territory or the state.
A master franchise is a firm or the single person who obtains the entire commercial right to use the brand , and to create the sub franchise for maintaining the business within a certain territory or the state. The person should promote the sub franchise under him and to manage the business development, brand reputation, provide training about the franchise and support the business in the specific territory as a Master franchisor.
FOR MASTER FRANCHISOR AGREEMENT :
Basically the master franchise agreement which mainly focuses on the three particular things:
- The company who owns the mark
- The products and outlets
- Master franchisee
The master franchise is more useful for international companies. Mainly the company granted all the rights to the master franchisor who acted as the franchisor for the specific region or the state. The master franchisor has all the rights to create the new sub franchise under them.
The master franchisor shall have all the intellectual property rights without the limitation in the state. It also includes the brandy royalty, manuals, business ideas, licences and other rights. The master franchisor should have the right to licensing the sub franchise and also assisting in the branches under the specific region or the state.
These are the necessary documents needed for the drafting of the security agreement.
ADVANTAGES OF BEING MASTER FRANCHISOR :
Being the master franchisor of the brand in the specific region or area is beneficial and advantageous for both the parties in the business.
- The franchising brand or the company reaches quickly by the master franchisor. So the foreign companies or brands easily achieve business growth in the specified state or the designated territory.
- By the help of the franchising brand the master franchisor should easily get the reputation, rights and royalty from the brands.
- From the master franchises the company business shall be developed, established in other countries and the sub franchises should be maintained by the master franchisor with which the marketing development is highly increased.
THE REQUIREMENTS IN THE MASTER FRANCHISE AGREEMENT :
[A] PARTIES IN THE MASTER FRANCHISE AGREEMENT :
In the cover page of the master franchise agreement it includes the parties who are going to agree to start master franchises of the registered Company or the brand, trademark of the business, logos, symbol of the brand. It includes all the details of the franchising company and the details ongoing to be franchised and all the information about the party who is going to initiate the master franchisor in the specific geographic location and the brief summary about the both parties with the specified date.
[B] THE RIGHTS GRANTED TO THE MASTER FRANCHISOR :
This part should become the objectives of the agreement, because the main thing which the brand or the franchisor granted rights which are mentioned. The rights, trademark licence, the licence for exploration, use of the IP rights, business tricks, marketing strategies, etc which are given to the master franchisor and the sub franchisor in the limit of the specific territory or the state in which the above specifics limits are provided in the agreement.
- The right to use the business marks, symbol, logo, slogan, and their business services which are granted from the foreign or franchising company brand.
- In the rights it also includes the terms and conditions which are mentioned in the clear view about the franchising brand.
[C] THE TERRITORY FOR THE MASTER FRANCHISOR :
The geographical location may be the state, territory or the entire country assigned to the master franchisor. The master franchisor should clearly characterise the estimated location of the specified location. What Else other third parties should not enter under the franchisor of the same brand. For the mentioned territory the only responsibility which belongs to the master franchisor is to assign the sub franchises under his appointments.
- The master franchisor should initiate the sub franchises under him by the franchising agreement for the mentioned specified location. For opening the new sub franchises should act under the guidance of the master franchisor and they should not act beyond the agreements.
- The master franchisor should specify the estimates for the sub franchising areas for the location.
[D] EXCLUSIVITY FOR THE MASTER FRANCHISOR :
The exclusivity is anything special for the master franchisor for organising the business level wider in the specific territory. For the master franchisor in return of exclusivity from the business or by the Franchisor brand which is designated in the specific territory. The company should have the exclusivity in return for the business, it would be the part of investment, shares, unlimited rights and the pleasure of royalty from the other franchisors. That should be specified.
[F] DEVELOPMENT SCHEDULES :
The development schedule is one of the important notes for the agreement. The master franchisor should incorporate the development schedules, which includes the number of the sub franchises with the specified area of location, and business development schemes for the new inaugurations of the business. Those kinds of schemes should be presented by him for minimising the disputes among the parties. This also includes the restrictions and scope of exclusive rights and the terminations of agreements and renewal of the agreement.
In this the master franchisor should secure the intellectual property of the brand and utilise the royalty and organise the brand growth in the specified location.
[G] FRANCHISE FEE OR COST :
The master franchise agreement which covers two types of fee. One is the master franchisor paid to the franchisor, the initial advance fee which allows the exclusive rights of the master franchisor. And overall franchise fee became the utilizer of the franchise. The master franchisor should pay the franchisor fee of 12% of the total value of all invoices which are delivered by the company for each accounting period. As well as the master franchisor is liable to pay the value added tax to the franchisor.
In case the master franchisor defaults or not paid the instalments amounts, dues of the franchisor. The 3% interest should be paid by the master franchisor to the Franchisor.
[H] AGREEMENT WITH SUB FRANCHISEE :
The settlement clause which deals with the procedures for the setting a claim if the dispute arises between them. This helps that any party act beyond the agreement the other party should claim compensation for the act.
For the validity or the enforcement of the indemnity agreement the both parties must give their consents to their agreement. Before signing the agreement for giving consent, both parties should be clear about their responsibilities and their obligations in the agreement.
[I] ADVERTISEMENT OF THE FRANCHISE :
Advertisement is one of the main things for reaching the brand familiarity and popularity among the specified territory. The master franchisor should arrange the funds for the advertising of such brands into the market. The second main role played by the sub franchisors. They are involved in respective responsibilities, control, and financing advertising about the franchising brand.
The fund rate of 2.5% amount which was already included with the franchise fee for the advertisement. Initially the program which is arranged and templates for the advertisement should be created by the franchisor itself for improving the services growth.
[J] TERMINATION :
Generally the master franchising agreement will terminate if the agreed period is over. If the agreement includes the term of renewal process for termination of the agreement, the master franchisor should involve the renewal process before the expiring of the such agreement.
The following condition that the franchising company has the right to terminate the agreement with the master franchisor in certain cases :
- The master franchisor agreement should naturally terminate at the event of the master franchisor being subjected to any bankruptcy and insolvency.
- The master franchisor should be involved in the event of misleading the company or the franchisor brand.
- The master franchisor fails or is incapable to start the business in 4 months from the date of agreements.
- The master franchisor fails to pay the dues of the franchising company or act beyond the agreement, the agreement should be terminated under those kinds of circumstances.
The franchisor has reserved the right to terminate such agreements incase of the act of master franchisor which harms the nature of the services or the brand provided by the franchisor.
[K] DISPUTE RESOLUTIONS :
The dispute resolution system is one of the important systems for resolving the disputes that arise between the franchising company and the master franchisor. However the foreign company brand or the franchisor which belongs to another country and the master franchisor from another country the international standard for the dispute resolution system was created to resolve the disputes among them.
Also they have to choose the arbitration process to manage time, costs other than the litigation. The party themself will choose the arbitrators for the disputes.
FAQ
FAQ :
WHAT IS MASTER FRANCHISE AGREEMENT ?
A master franchise agreement is one type of the franchising agreement. In which the brand or the company gives all the control to the master franchisor in the specific territory or the state.
A master franchise is firm or the single person should purchase the entire right to sub franchise within a certain territory or the state. The person should promote the sub franchise and manage the business development, providing training about the franchise and support for the business in the specific territory.
WHAT ARE THE ADVANTAGES OF MASTER FRANCHISOR ?
Being the master franchisor of the brand in the specific region or area is beneficial and advantageous for both the parties in the business.
The franchising brand or the company reaches quickly by the master franchisor. So the foreign companies or brands easily achieve business growth in the specified state or the designated territory.
By the help of the franchising brand the master franchisor should easily get the reputation, rights and royalty from the brands.
From the master franchises the company business shall be developed, established in other countries and the sub franchises should be maintained by the master franchisor with which the marketing development is highly increased.
WHAT IS THE FRANCHISE FEE OR COST ?
The master franchise agreement which covers two types of fee. One is the master franchisor paid to the franchisor, the initial advance fee which allows the exclusive rights of the master franchisor. And overall franchise fee became the utilizer of the franchise. The master franchisor should pay the franchisor fee of 12% of the total value of all invoices which are delivered by the company for each accounting period. As well as the master franchisor is liable to pay the value added tax to the franchisor.
In case the master franchisor defaults or not paid the instalments amounts, dues of the franchisor. The 3% interest should be paid by the master franchisor to the Franchisor.
WHAT ARE THE CIRCUMSTANCES THAT THE FRANCHISING COMPANY TERMINATE WITH THE MASTER FRANCHISING AGREEMENT ?
The following condition that the franchising company has the right to terminate the agreement with the master franchisor in certain cases :
- The master franchisor agreement should naturally terminate at the event of the master franchisor being subjected to any bankruptcy and insolvency.
- The master franchisor should be involved in the event of misleading the company or the franchisor brand.
- The master franchisor fails or is incapable to start the business in 4 months from the date of agreements.
- The master franchisor fails to pay the dues of the franchising company or act beyond the agreement, the agreement should be terminated under those kinds of circumstances.
WHAT ARE THE BASIC RIGHTS GRANTED TO THE MASTER FRANCHISOR ?
The rights including, trademark licence, the licence for exploration, use of the IP rights, business tricks, marketing strategies, right to sale, right to utilise the brand and other rights etc, which are given to the master franchisor and the sub franchisor in the limit of the specific territory or the state in which the above specifics limits are provided in the agreement.
MASTER FRANCHISE AGREEMENT
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