A Franchise Agreement, also sometimes called a Business Franchise Agreement, is a document between two main parties, the party that will be franchising out their already well-developed business model, called the franchisor, and the party that will be agreeing to certain terms and conditions in order to create their own franchised business based on that business model. In a franchise agreement, the franchisor lays out the expectations and requirements for a franchisee to run a business under their brand name. It can be any type of business and often, restaurants or small retail outlets are run as franchises.
Within these agreements, the franchisor and the franchisee each outline their expectations for behavior and agree to the bounds of the relationship between them. Mostly, it is the franchisor describing rules the franchisee must follow, but there are also certain portions of the agreement that relate to the protection of the franchisee.
A Franchise Agreement helps the parties delineate the most important details of their relationship: things such as a description of the franchisor's business, quality control standards, and of course, fee information for the franchisee. A good Franchise Agreement will also have both parties covered in case anything goes wrong: things such as dispute resolution and governing law are also included.
How to use this document
This document can be used by a franchisor about to enter into a business relationship with a new franchisee or for a franchisee looking for a document to present to a potential franchisor for agreement. In this document, pertinent identifying details will be included, such as whether the parties are individuals or businesses, and their respective addresses and contact information. Information on the most important characteristics of the agreement between the parties will also be included, like duration of the agreement, fee information, and even how the franchisor's branded marks and copyrights should be treated.
The parties will be able to choose several specifications for how the agreement should be formed, including things like what obligations the franchisor owes the franchisee, if any. This Franchise Agreement is a robust document that will help ensure the relationship between the franchisor and franchisee flows smoothly.
The Franchise Agreement will be legally binding when it has been printed on judicial stamp paper or e-stamp paper and signed by both the Franchisor and the Franchisee, and has been dated. The value of the stamp paper would depend on the state in which it is executed. Each state in India has provisions in respect of the amount of stamp duty payable on such agreements. Information regarding stamp duty payable can be found on the State government websites. For instance, the website of the state of Karnataka provides details of stamp duty payable on agreements as does the website of the Delhi.
Both the Franchisor and the Franchisee should keep a signed copy of the Franchise Agreement. In order to do this, two different copies can be signed, or if only one copy is signed, it can be photocopied and then distributed between the parties.
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