What Is A Franchise?
Franchising is essentially the permission given by one person (the franchisor) to another person (the franchisee) to carry on a particular business using a specific name and a specific business model belonging to the franchisor.
In a franchise transaction, the franchisor and franchisee are required to enter into a Franchise Agreement. The Franchise Agreement will set out the terms and conditions for the franchisee to be given the right to use the franchisor’s brand name, business model, intellectual property, products and In return for payment of fees periodically and acceptance of those restrictions by paying franchise fees and royalty to the franchisor on a regular basis.
Each business outlet is owned and managed by the franchisee. The franchisor retains control over the way in which products and/or services are marketed and sold and supplied, and controls the quality and standards of the business and the business is owned and managed by the franchisee in accordance with the Franchise Agreement.
For the Franchisor
Examples of some typical terms to protect the franchisor in the Franchise Agreement :
· Terms that enable the franchisor to adequately monitor the franchisee’s performance
· Terms that protect the franchisor’s intellectual property rights
· Terms that restrict the franchise on the use of rights that have been granted by the franchisor to the franchisee in the setting and operation of the franchise business
For the Franchisee
Examples of some typical terms to protect the franchisee in the Franchise Agreement :
· Terms that provide for the training of the franchisee and their personnel
· Terms that deal with the supply of goods and or services
· Terms which stipulate the responsibility for marketing, advertising and promotions
· Terms that may provide for assistance in finding suitable premises and help to fit out in the premises in the correct manner
· Terms that set out the provision of management and accounting services
For legal services and advice on franchise agreement and franchising, please contact Chow & Cheung, Hong Kong Solicitors & Notary public [E-mail：cac@ccsn.hk / Tel: +852 2856 3078].
www.ccsn.hk