Draft a Master Franchise Agreement
A master franchise agreement is an umbrella agreement entered into between a franchisor and each franchisee detailing terms that are applicable to all franchisees. A franchisee may also enter into individual agreements that specify the terms of its individual relationship with the franchisor. A master franchise agreement is an important legal document that should be drafted with care.
Instructions
1. Draft a preamble to the agreement that identifies the parties by name, address and contact details. The party granting franchise rights is known as the "franchisor," while the party receiving franchise rights is known as the "franchisee." The preamble should state the purpose of the master franchise agreement in general terms.
2. Draft a "scope of rights" section in which the grant of franchise is identified as either exclusive or non-exclusive. If the grant is exclusive, then the agreement should state the exact territory in which the franchisor is not allowed to grant a competing franchise.
3. Draft an intellectual property section that states the exact nature of the intellectual property rights that are licensed to the franchisee. These may include trademarks, patents, copyrights, trade secrets, and signage (use of McDonald's golden arches, for example).
4. Draft a detailed section that describes the business methods and operating standards that are required of the franchisee. This section should also clearly state what type of breaches will result in forfeiture of the franchise.
5. Draft a section that details the training and support that the franchisor will offer to the franchisee and its employees, along with any publications that the franchisee will be granted access to. An effective franchise arrangement generally requires the franchisor to offer continuous training and support throughout the term of the agreement.
6. Draft a section that lists the initial franchise fee, royalties (as a percentage of sales volume or other negotiated basis) and the initial investment required of the franchisee. If the franchisor will take care of certain initial expenses (such as signage), these should be listed in this section.
7. Draft an advertising section in which advertising responsibilities and costs are allocated between the parties. Generally, the franchisor will be bound to very specific advertising obligations and the franchisee will be bound to certain financial support obligations.
8. Draft a section in which the term of the agreement and conditions for renewal are specified and events that entitle a party to cancel the agreement or refuse to renew it are specified.
9. Add standard contract "boilerplate" such as dispute resolution methods and governing law. Carefully tailor the wording of these clauses to fit the specific conditions of the agreement (which state's law should govern, for example, if franchisees are scattered throughout the country).
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