08 Sep, 2017

Master Franchise Agreement Definition

Master franchise agreement definition Multiple factors encourage the global brands to enter into master franchise agreement definition for India including benefit of acquaintance of the master franchisee with local environment; local sales and marketing expertise of the master franchisee; ready availability of sales and marketing channels; reduced investment; sharing of expenses; negligible government approvals; no requirement to recruit local workforce and consequently lower financial risk. Further, the regulatory restriction on retail trading by foreign companies is a major factor for boom of master franchising arrangements in India. Master Franchising Agreements: Due to the nature of the business and consideration involved, the master franchise agreement definition is fairly complex documents. A typical master franchise arrangement enables the master franchisee to develop the business in the territory under the franchisor's brand name and trademark with or without permission to manufacture the products locally, provides guidelines for operation of business and specifies returns for the franchisor. Depending on the arrangement, a Master Franchise Agreement would ordinarily govern: • Permission and restrictions on use of trademark within the territory; • Transfer of technical know how concerning manufacturing, advertising or marketing; • Financial returns to the franchisor, including royalty and fee for services; • Appointment of sub-contractors to manufacture and sub-franchisee to sell the products at different locations within the territory; • Control over the sub-contractors and sub-franchisees through master franchisee; • Manufacturing process including approval of samples and quality control; • Provision of dedicated staff by the franchisee; • Appearance of the franchise stores and training of sales executives; • Annual market penetration targets; • Minimum stock purchase/import obligations; • Joint marketing, sharing of advertising cost and support by the franchisor; • Periodic reporting by the franchisee; • Duration, renewal or termination of the arrangement; • Events of default, pre-termination notice to correct, termination, etc.; • Exit options, if any or both parties do not wish to continue; • Post termination obligations including assignments of trade contacts; return/destruction of advertising material, liquidation of unsold inventory, raw material and destruction of sub-standard products, if any; • Provisions governing confidentiality, warranty, intellectual property protection and insurance. The rightful consideration of the brand name owners to establish and maintain market reputation compels them to stage-wise describe the inherent processes and prescribe their participation in crucial decisions. From a financial standpoint, while analyzing initial and running costs, the master franchise agreement definition should include the costs of acquiring the requisite technical know-how and skills to operate the business; import of initial inventory; transportation of material; establishment, lease rentals and maintenance of franchise stores; translation/adaptation of manuals; local market research; salaries and professional fees. The franchisee may seek flexibility over payments to the franchisor and modification of business and other targets from time to time.