Franchising is another form of licensing agreement whereby, as the franchiser, you transfer to the franchisee a total business concept which he exploits within a given territory in return for royalties for the IPRs licensed. There is also commonly a supply arrangement whereby the franchisee is committed to buying his requirements from you.
A franchising agreement would normally involve the supply to the franchisee of expertise, branding, corporate image and management support. In return you would hope to receive an initial sum, payment for goods supplied and sales-based royalties.
Other key provisions would include the following:
- The duration and territory of the franchise;
- the franchisee's obligations and minimum performance requirements;
- price and payment for supplies of stock; royalty levels and payment;
- records that the franchisee must keep for your inspection;
- your obligations to support the franchisee;
- confidentiality issues; termination arrangements and your respective rights on termination;
- and applicable law and dispute resolution.
Franchising is equally applicable for UK only or overseas use. Overseas, it may be appropriate to appoint a national head-franchisee to monitor and police local sub-franchisees.