Franchise contract: Important terms

A franchise contract is an important legal tool to determine the rights and obligations between the franchisor and the franchisee in implementing commercial business activities. To ensure efficiency and limit risks, the parties need to pay special attention to important terms in the contract. The article below will help customers better understand this content.

What is a franchise contract?

A franchise contract is a legal document that stipulates the rights and obligations between the franchisor and the franchisee. According to Article 284 of the Law on Commercial 2005, franchising is a business activity in which the franchisor authorizes and requires the franchisee to conduct business according to its model, methods, trademarks and other brand-related elements.

Main features:

• Associated with the brand, trade name, and business secrets of the franchisor.
• The franchisor has the right to control and support the franchisee’s business process.

Role of contract:

• Protect the legal rights of both parties.
• Ensure consistency and brand reputation.
• Minimize legal risks arising during the business process.

Characteristics of franchise contracts

Contract subject:

• Franchisor: A trader can be an organization or individual doing business.
• Franchisee: A trader who is allowed to use the franchisor’s brand and business model.

Contract object:

Commercial rights, including:

• Business model, management system, operating methods.
• Use trademarks, trade names, business secrets, slogans, business symbols.

Contract form:

• According to Article 285 of the Law on Commercial 2005, franchise contracts must be made in writing or in forms with equivalent legal value (fax, telex, email with electronic signature).

Contract content:

Includes terms:

• Rights and obligations of the parties.
• Franchise fee and payment method.
• Validity period and renewal conditions.
• Dispute resolution method.

Important terms must be included in the franchise contract

Terms of commercial rights:

• Clearly stipulate the franchisee’s rights in using the brand and business model.
• How to use trademarks, slogans, logos and other intellectual property.

Terms of operation area:

• Specifies the geographical area in which the franchisee is allowed to do business.
• Whether or not there is a monopoly in the franchised area.

Terms of franchise fee:

• Initial fee: The fee the franchisee pays to join the system.
• Operating fee: Percentage of revenue payable monthly/quarterly.
• Other fees (advertising, technical support, system upgrades).

Terms of support and training:

• The franchisor must provide training, technical and management support to the franchisee.
• Clearly define the time, form and cost of training.

Terms of confidentiality and transfer:

• The franchisee commits not to disclose business secrets or technological know-how.
• Regulations on whether the franchisee is allowed to transfer the contract or not.

Terms of contract termination:

• Clearly stipulate cases of contract termination (breach of obligations, bankruptcy, failure to achieve committed revenue).
• Legal consequences when terminating the contract.

Terms of dispute resolution:

• Identify the jurisdiction (court, arbitration) and applicable law.
• Dispute resolution methods: mediation, negotiation, litigation.

Latest franchise contract sample

DOWNLOAD THE LATEST FRANCHISE AGREEMENT FORM: HERE.

Consulting services and support for drafting franchise contracts at Long Phan

Long Phan is a unit that provides consulting services and drafts franchise contracts. With a professional team and knowledge about legal regulations, Long Phan is committed to helping customers complete procedures quickly and ensure compliance with regulations.

• General consulting on franchising.
• Analyze the rights and obligations of the parties in franchising activities.
• Guide businesses to prepare necessary records, documents and conditions to carry out franchising.
• Support in drafting franchise contracts.
• Evaluate the legality and risks in the franchise contract.
• Check compliance with regulations on commercial franchising (such as franchise registration regulations at the Ministry of Industry and Trade).
• Consulting on contract adjustments to optimize benefits and limit disputes.
• Representing customers in contract negotiations.
• Consulting, supporting or representing in resolving disputes arising related to franchise contracts.
• Register for a franchise.

Franchise contracts are an important foundation to ensure success in the franchise business model. For detailed consulting support and effective contract drafting, please contact Long Phan immediately via the hotline 0906735386.