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A Master Franchise Agreement is a legally binding contract between a franchisor, a franchisee and a principal. The franchisor grants the franchisee the right to operate a business under the franchisor's brand and system, in exchange for fees, royalties and compliance with operational and quality standards. The franchise contract defines the terms and conditions of the franchise operation, including the permitted territory, intellectual property, proprietary marks, operating manual and advertising contributions. The franchisee agreement also outlines the franchisee's rights, benefits, and protections, as well as the principal's liability and individual binding.
The franchise agreement typically includes definitions of key terms such as Accounting Reference Date, Business, Commencement Date, Credit Limit, Expiry Date, Gross Turnover, Initial Fee, Insurance Premium, Minimum Performance, Operating Manual, Payment Date, Permitted Name, Premises and Products/Services. The franchisee benefits from the knowledge, skill and experience of the franchisor and the established reputation and goodwill of the brand. The franchisor benefits from expanding its business through the franchisee's efforts while retaining control over the quality of the products and services offered under its name. The franchisee is required to adhere to the franchisor's standards, procedures and specifications to maintain the consistency and quality of the brand. Failure to comply with the franchisee agreement can result in termination of the contract and the loss of the franchisee's investment. Therefore, it is crucial for franchisees to carefully review and understand the terms of the franchise agreement before signing and committing to the franchise operation.
1. Start by reading the document carefully to understand the agreement between the parties involved.
2. Familiarise yourself with the definitions provided in the agreement, which include Accounting Reference Date, Business, Credit Limit, Expiry Date, Gross Turnover, Initial Fee, Insurance Premium, Minimum Performance, Operating Manual, Payment Date, Permitted Name, Premises, Products/Services, and Proprietary Marks.
3. Note that the Franchisor has established a successful business model and is offering the Franchisee the opportunity to use their knowledge, skills, and experience to operate the same business under certain conditions and guidelines set out in the agreement.
4. Take note of the obligations and responsibilities of each party, including the Franchisor's obligation to provide the Franchisee with support and training, the Franchisee's obligation to operate the business in accordance with the guidelines and standards set out by the Franchisor, and the Principal's relationship with the Franchisee.
5. Understand the financial terms of the agreement, including the Advertising Contribution, Credit Limit, Gross Turnover, Initial Fee, Insurance Premium, and Minimum Performance, and how they affect the Franchisee.
6. Take note of the Payment Date and the Permitted Name and ensure that you are able to comply with these requirements.
7. Make sure that you understand the termination clause of the agreement and the circumstances under which the agreement may be terminated by either party.
8. Seek legal advice if you have any questions or concerns about the agreement.
By following these steps, you can use this document to understand the terms of the franchise agreement and ensure that you are able to comply with the obligations and responsibilities set out by the Franchisor.