Franchise Agreement

A Franchise Agreement is a contract between two parties namely the Franchisor and Franchisee to allow the latter to use the business model or system of the former. A Franchisor is one who operates a business that has been developed already. The Franchisor then allows to use its business model or system and operate under the franchise business name in exchange for a payment of a fee or series of fees. A Franchise Agreement lays down the terms and conditions as to how the Franchisee can operate the franchise business using the brand, goodwill, and reputation of the Franchisor.

Illustration: Company A is a well-established fast-food restaurant that has gained popularity over the years. To allow the brand of Company A to expand in other parts of the Philippines, it now allows its business model to be used by other persons or businesses. This is called a Franchise Business. Company B now wants to operate under the business model of Company A, and to do that, they would have to enter into a contract called a Franchise Agreement.

A Franchise Agreement provides the rights and obligations of the parties. The franchisor sets what the franchisee should expect when the Franchise Agreement is executed and signed by the parties, specifically what should be done by the Franchisee before, during, and after executing the agreement according to the standards laid down and instructions given by the Franchisor.

This kind of agreement helps the parties set the boundaries of their relationship as a franchisor and franchisee. The terms and conditions under a Franchise Agreement generally provide the rights of both parties, remedies available, fees to be paid, prohibitions, and instructions that must be followed by the franchisee.

How to use this document

The franchisor must provide the details concerning its business including its identity, representative name, principal address, and other relevant business details. Similar details of the franchisee must also be provided. The parties may either be individuals or entities such as corporations, partnerships, and sole proprietorships and this fact must be provided.

The terms and conditions will be provided in this agreement stating the obligations of the franchisee to the franchisor, the term or of the agreement, the relevant dates such as the opening date and commencement date, rights and obligations of the parties relevant to the intellectual property rights of the franchisor such as brand marks, trademarks or service marks and other relevant copyrights. Further, the franchisor may include what it must conduct for the benefit of the franchisee.

After providing the relevant details of the franchise agreement, the parties must notarize the same, they must print three copies, one for each of them, and one for the notary public. After printing, they must sign the same and present their identification before the notary public.

Applicable law

There are no specific laws in the Philippines that regulate the relationship between the franchisor and franchisee. However, franchise agreements in the Philippines are subject to the provisions of the Civil Code of the Philippines, and the Intellectual Property Code. A franchise agreement may also governed by the 2004 Rules on Notarial Practice. It should also be noted that making untruthful statements in a notarized deed may be punishable under the Revised Penal Code of the Philippines.

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