08 Sep, 2017

Franchise Contract Sample

Franchise contract sample A franchise contract sample is a sophisticated form of Licensee Agreement. It is therefore necessary to first look briefly at what a license is and what can be licensed. A license agreement is a contractual business relationship between a licensor and licensee. The licensor is either the proprietor or a holder of certain intellectual property rights or technology, which he allows the licensee to use in return for some sort of remuneration or other advantage. Intellectual property rights that can be licensed include statutory or non-statutory intellectual property rights. Statutory intellectual property rights include patents, designs, and trademarks and copyright whereas non-statutory intellectual property rights include know-how, trade secrets, customer lists, formulas, business methods, personnel training and manuals. The object of a license is almost invariably to commercially exploit technology or intellectual property. To ensure the long term success of a franchise contract sample in other words, to achieve a win/win situation, the license must be structured in such a way that it is to the mutual benefit of both parties. Types of franchises Although it is often said that there are two main types of franchising, namely (i) product and trademark or trade name franchising and (ii) business format franchising, this is not an accurate explanation. A more correct approach is to view a product or trademark franchise, as franchising in a simpler form in that the franchisee is only entitled to use the franchisor’s name or trademark and product. This type of franchising is prevalent amongst motor vehicle dealers, soft drink bottlers and certain fuel service stations. Thus in a product or trademark franchise only a single or a limited number of intellectual property rights are used. Definition of franchising The International Franchise Association (IFE) defines a full business format franchise as follows: “A franchise operation is a contractual relationship between the franchisor and the franchisee in which the franchisor offers or is obliged to maintain continuing interest in the business of the franchisee in such areas as know-how and training, wherein the franchisee operates under a common trademark, format or procedure owned or controlled by the franchisor, under which the franchisee has or will make a substantial capital investment in his business from his own resources.” It is apparent that the key elements of the definition include: (1) a contractual relationship, (2) the franchisor offers or is obliged to maintain a continuing interest in relation to the know-how and training, (3) the franchisee operates under a common trademark, format or procedure, (4) owned or controlled by the franchisor, and (5) the franchisee has or will make a substantial capital investment from his own resources. The licensing of intellectual property to the franchisee is a central theme of the franchise contract sample.