Franchisees may need to provide personal guarantees.
• Part 2- The franchisor’s obligations Pg 168 Fig 9.2 Pg 170- Franchise obligations Franchisor’s obligations include: Maintain registrations of trademarks and prevent unauthorised use - franchisor may exercise discretion as to how far to pursue misuse due to costs. Train franchisees and possibly staf - fees for such may be absorbed in initial fee, but ongoing training may be an extra cost. Location of training will be determined in the agreement. National or regional marketing - Franchisors will need to disclose how marketing levies are spent. Local marketing generally undertaken by franchisees. Supply stock and equipment - as far as the agreement requires. Administrative and bookkeeping support may also be supplied for a fee. Supply ongoing support to franchisees - obliged to provide operating manual but no obligation for site visits or mentoring. Continuous system improvement - developing systems further. • Part 3- The franchisee’s obligations Pg 171 Can be classified into categories Financial Must pay the franchisor an initial franchise fee (sometimes called the purchase fee) an initial training fee ongoing royalties (often calculated as a percentage of gross receipts) ongoing marketing levies ad hoc training fees Other fees may include fees for accounting/bookkeeping, local marketing, premises refitting, leasing. Operational Compliance Comply with all of the terms of the franchise agreement as well as the Operations Manual (as it may be amended from time to time). May include opening hours, fit out requirements, uniforms, goods and services that may and may not be supplied by the franchisee, point of sale technology, staffing levels and how the customers or clients are served, territory boundaries, use of brand image.
Reporting and Transparency Make adequate payments to franchisor and allow access to books and operational information. This information is used by franchisor to improve the system and ensure franchisee compliance with the agreement. Localised Promotional Work Franchisees are usually required to do their own local promotion. May have to participate in pricing discount strategies subject to local laws. Confidentiality Franchisees do not disclose confidential information regarding the system and intellectual property of the franchisor unless expressly authorised. Transfer of Business Franchisees must not sell or assign their rights under the agreement to a third party without the express permission of the franchisor. It is essential that the franchisor is able to maintain control over who can join the system. Restraint of Trade Clauses are designed to prevent the franchisee going into business in direct competition with the franchisor upon cessation of the agreement. Customers will invariably remain those of the franchisor at the end of the agreement.
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- Fall '19
- Edward Kaplan
- Team Work- Franchisee and Franchisor