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Tips On Franchise Agreements

3) Due Diligence Franchisee: Talk to as many existing franchisees as possible and receive as much information as possible from them about the franchisee and the franchise. Sometimes you can get extra support when you open the franchise for the first time. Sometimes the franchisor`s staff agrees to be on-site during the opening to give advice and training, and some franchisees may even contribute to the advertising and marketing costs for the brand new site. In general, it has the impression that any party can terminate the contract by giving the other a period of notice, otherwise the terms of the existing franchise agreement will be considered as still in force. What happens when the franchise agreement expires or ends prematurely? The document sets out what the parties must do to manage the business relationship. Typically, this is a long list of specific commitments for the franchisee. These include the obligation to stop using the brand name, remove signs, return instructions for use and pay all amounts due. It is not surprising that litigation can be common in the franchisee and franchisee relationship. Buying a franchise involves entering into a long-term relationship that typically lasts 5 or 10 years and requires a high degree of trust between the parties. For some franchisees, this can be emotional, as they can spend living savings or borrow to fund their franchise fees, and in return they seek the support and system that a franchisee can offer. Franchise agreements often contain restrictive agreements that limit what franchisees can do. For example, you or a related business may not contract to operate a competing business during the term of the contract.

There is no standard franchise agreement for the entire industry. Each franchised brand establishes its own contractual documentation. Most agreements contain common types of provisions, but they will not be worded in exactly the same way. In China, the franchisee must register with the Ministry of Commerce (Mofcom) and provide, within fifteen days of signing the first franchise agreement, the following documents: (1) its business license or registration certificate, (2) the draft franchise agreement, (3) the operations manual, (4) a market development plan, (5) proof that the franchisee`s qualification requirements have been met. Then, an annual update of the number of franchisees on the Chinese network is necessary. The fact that the instruction manual needs to be disclosed is seen by many franchisees as a problem.. . . .

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