What Is a Master Franchise Agreement

Black`s Law Dictionary defines a franchise agreement as “the agreement between a franchisor and a franchisee that sets out the terms of the franchise relationship.” This relationship grants the franchisee the exclusive right to participate in a particular business. A corporation is defined as a “commercial enterprise carried on with the intention of making a profit”; Therefore, a franchise could be conceived as the means by which many entrepreneurs develop a business. Is a senior franchisee considered a development agent? Even if the master franchisor has done a lot of research, you should back up his conclusions with your own. Prepare a business plan to be sure to make a solid investment. Before investing, you should also inquire about the franchisor and the history of the company. Ask for the franchise information document if it is available, as this is where you will get all the necessary information about the main franchise, including financial elements. Finally, when discussing the opportunity with the master franchisor, trust your instincts. If that doesn`t sound right, think carefully about whether doing business with them is the best decision. MLAs typically cover two types of franchise fees to be paid by the primary franchisee to the franchisor. The first is the initial fee for the rights granted. The second is a continuing franchise fee (often referred to as a license fee or ongoing fee) for the use of the franchisor`s franchise system and ongoing support service. It does not have to be a lump sum paid in advance. In many franchise systems, the initial fee is divided into equal tranches or small upfront payments and then into unit payments.

The franchise fee is a fee for the continued use of the rights granted and the support provided. It is quite common for franchise fees to be calculated as a percentage of the principal franchisee`s income. However, the parties are free to agree and use different methods to determine these costs. These can range from paying a monthly flat fee to a variable fee (on sliding scales or not) calculated based on revenue, purchases or sales, etc. The most common obligations of a master franchisee to its sub-franchisees are: How to protect the franchisor from violations by its sub-franchisee, lead franchisee or development agent Sub-franchise agreements must reflect the key terms contained in the framework franchise agreement, or even the form of the sub-franchise agreement can be attached to the franchise framework agreement as an attachment. In addition, the franchisor may reserve the right to approve sub-franchisees and the location where each sub-franchise is developed and to determine the economic relationship between the primary franchisee and its sub-franchisees, including royalties and other fees. The main difference between sub-franchise, master franchising and development agents is that sub-franchise and master franchise agreements grant a license and franchise to use and exploit intellectual property rights and provide technical support and know-how. Meanwhile, development agents enter into an agency agreement, with no license or franchise provided. A senior franchisee is not considered a development agent.

The main difference between the two characters is that a development agent will never run a franchise; That is, it is not granted with a franchise and the right to operate a franchise business, which the primary franchisee can do either directly or by granting such a right to a sub-franchisee. In some jurisdictions, franchisors are required to provide franchisees with certain information before granting a franchise, which is done by providing a disclosure document. Such an information document must be given by the franchisor to the prospective franchisee before the date of the franchise agreement. As a general rule, franchise information documents are required to disclose the franchisee`s technical, economic and financial information to the prospective franchisee. If you`re considering buying a franchise or franchise in your own business, these books are a great place to start. MFAs typically include a development plan that describes the evolution of the number of franchise units to be opened in the assigned territory. It is in the interest of all parties concerned to approach this subject realistically in order to keep possible conflicts as low as possible. The agreement should provide solutions to the situation in which no realistic minimum development is achieved (e.g. B, limit the scope of the exclusivity granted for the termination of the agreement). There are three participants in this type of contract: the franchisor who owns the brands, the know-how (franchise manual) and the products; the lead franchisee who will develop the franchise business through the research, selection and control of franchisees; and franchisees who are the people who manage the points of sale. .