Commercial / Franchise / Sponsorship Agreements

Introduction

There are many different types of agreements to deal with business transactions, such as commercial agreements, commercial contracts, and loan agreements. Here are some documents that may help you to build your collaborative partnerships:

A. Franchise Agreement

The Franchise Agreement is a legally binding document that outlines the franchisors' terms and conditions for franchisees. Each franchise is governed by these terms, which are generally outlined in a written agreement between the two parties. The Franchise Agreement is signed when an individual or a company decides to enter the franchise system.

A typical franchise would normally include the following elements:

• a trademark;
• a defined and validated transaction method or system;
• the trademarks are to be adopted and paid for by the franchisees; and
• franchisees have a right to sell the business to a third party and receive goodwill gained from the business over time.

B. Sponsorship Agreement

The Sponsorship Agreement relates to the sponsorship of a single event on the basis that the sponsor pays the sponsorship fee as a contribution to the cost of the event in a fixed amount. Alternatively, the sponsor may provide facilities such as a venue, lights, sound or timing device, which would otherwise cost the sponsored party the market price of hiring it.

Where the event lends itself to such treatment and particularly if a sponsor is a sole sponsor, the sponsor may require merchandising rights relating to the event. In such a situation a separate agreement would normally be entered into relating to the grant of product merchandising rights relating to the event.

Most sponsors will want to obtain a tax deduction for their sponsorship payments and the technicalities of obtaining a tax deduction should not be overlooked. This is because sponsorship can be so closely involved with entertaining and patronage which can be prejudicial to obtaining a tax deduction.

C. Brand Ambassador Agreement

The Brand Ambassador Agreement sets clear terms and guidelines for cooperation with social media influencers or brand ambassadors. It lists expectations transparently and provides a reason for the accounting treatment of the influencer’s marketing campaigns. As with sponsorship agreement, the tax element should not be overlooked as it is possible to put at risk the obtaining of a tax deduction for all or some of the payments concerned.

These are merely illustrative examples of commercial contracts that you can consider using for your business. It is best that you consult your business attorney before entering into any commercial partnerships or commercial arrangements. You may need to tailor your contract clauses to account for your product details that may be different from others.