The right to operate a franchise business is only allowed in a given territory. In rare cases, this region could be the world, or even a country. In other cases, the area covers only a certain geographical location and a radius around it. A potential franchisee should also determine whether its territory is exclusive, which means that no other franchisee or business business is allowed in the territory or if the territory is not exclusive. Franchisors take a lot of time and effort before authorizing a franchisee. As a result, the franchisee`s ability to transfer the franchise is strictly controlled. The franchise should take a look at when and at the end of what process it might be able to transfer its franchise if necessary. The franchise agreement will also look at situations in which the franchise may be transferred, for example. B the death of a franchisee. It is very important to carefully consider the obligations of the franchisee and the consequences of the non-performance of these obligations. As a general rule, franchisees must pass their training in order for the franchise to be granted. Other common commitments require the franchisee to purchase products only from licensed suppliers.
A franchisee is also required to operate the franchise business according to certain franchising standards. It is customary to find obligations that require the franchisee to have its activities verified at any time by the franchisor. This section shows which brands to use by the franchisee. The use of franchised brands is granted to the franchisee. With the exception of the franchise agreement, the franchisee is not entitled to use the franchisor`s trademarks. The franchise agreement will also confirm that the franchisee does not obtain any rights to the trademarks and that all commercial or legal rights arising from the franchisee`s use of the marks benefit the franchisor. The franchisee should also carefully consider what happens to the brands in the event of the franchisor`s bankruptcy, since the franchisee intends to guarantee its right to use the marks continuously even in the event of the franchisor`s departure. The franchise agreement will have a section on the franchisee`s contribution to the franchise marketing fund. The funds are generally used to finance local and larger-scale marketing campaigns, which the franchisee can benefit from.
The franchise agreement details the resources and percentages that normally must be paid monthly to the marketing fund. The franchise agreement certainly requires strict standards for registering and reporting revenues and expenses from the franchisee to the franchisor. The franchisor will need this information to determine the health of its own franchise systems and to ensure that the franchisor returns the appropriate current amounts for the marketing fund and royalties.