FRANCHISEE AGREEMENT: AN ANALYSES BY - DEEP KAPADIA
FRANCHISEE AGREEMENT: AN ANALYSES
AUTHORED
BY - DEEP KAPADIA
Abstract
Franchisee concept is growing with leaps and bounds, it is seen out of
every 7 businesses 1 turns up into the franchisee systems. A wide analyses
shows that the franchisee system is cost effective but gives commanding
returns.
Also, the risk involve of investment, dependency on employees,
non-attention of employees and is divided as we get the franchisee owner who
himself is involved in business as if it is his own, and act with full interest
and enthusiasm to grow the business.
Though the Franchisee system is highly preferred but there are yet no
laws in India. So, how do we look towards the Franchisee development in India.
Very simple answer is Franchisee can be analysed or measured in law on
following aspects:
1.
Intellectual Protection Act
2.
Supplier-Distributor relationship/ service provider relationship
3.
Taxation systems
4.
Franchisee and Franchisor relation
5.
Dispute resolution[1]
But, above it, most important is Franchisee Agreements, and majorly
entire India depends on working of franchisee under the roof of ‘agreement’
i.e. Contract Act, 1856.[2]
This Research paper, probe in the analyses of the agreement formation for
the ‘Franchisee’. Generally, the franchisee agreement or any business agreement
goes with following terms:
1.
Parties involved
in the franchisee
2.
Purpose or
type of franchisee
3.
Grant of Franchisee- Territorial rights, Terms and
renewals and Franchisee IP rights.
4.
Franchisee Income: Franchisee fees and Royalty
or terms of payments
5.
Franchisor obligations- Training
support, advertising and branding support and other facilities
6.
Franchisee Obligations- SOPs, Reporting requirements, any compulsions of buying products or other aspects, and
Non-compete Clause.
7.
Intellectual property rights- Ips, Its grant extends, Protecction and infringement
clause
8.
Dispute resolution- Arbitration and Governing laws
9.
Considerations- Earning claims
and capital Investments
10. Termination and Exist clause- Grounds of termination, Exit clause and post termination obligation.
11. Risk information terms- Business risk and legal
risk
12.
Miscellaneous Provisions- amendments, assignment and transfer, and force majeure
Franchisee Contract is amalgamation of the franchisor rights to protect
its idea, create his right of the royalty, give right of the franchisee, create
the roles of the both party and reserve the profits with restriction on
production/ services within the area limitation and granting the rights of area
and accordingly give the sufficient earning.
When franchisee agreement is develop the content is not related to one law, rather it is related
to 14 types of law Viz, The Indian Contract Act, Labour Law, Competition act,
IPR, Companies act/ Partnership acts, Consumer protection act, Income tax/ GST,
Banking laws, copy rights and trade mark, Arbitration act and FEMA (in concern
with international brands) etc.
While constructing such agreement
one needs to also take care of:
1.
Uniqueness of franchisee
2.
Exclusivity of
product / area
3.
Price restriction
4.
Resale rules and rates.
5.
Model of
operation, specially marketing and product display
6.
Maintaining the position, charges and royalty of franchisee consultant.
These all the above mentioned points clearly explains that Contract law
alone is not sufficient to handle such agreement. So, it makes such agreement unique and competitive. So,
we are inclined to place such agreement under the special contract yet out of
the scope of contract act. These give the need of giving special concern for
creating new law of contract.[3]
So, let’s unlearn the contract with special view of making regular
contract, under 14 laws and few landmark judgments over agreement issues in
franchisee agreement.