What is the Franchise Agreement (Commercial Affiliation)?

Franchise Agreement

The Franchise Agreement, also known as a commercial affiliation, is the agreement by which a parent company (franchisor) allows another (franchisee) to use its commercial formula to sell goods or services, in exchange for a fixed fee. or royalties.

The commercial formula is the fulcrum of the franchise agreement. It includes the know-how, the use of trademarks and distinctive signs (signs, drawings, etc.), as well as any technical and commercial assistance services that allow the franchisee to manage the business according to the standards of the parent company. The contract will make it possible to define this format precisely and to indicate the obligations and conditions that the parent company will impose on the affiliates to guarantee the desired quality levels.

With franchising, the parent company can grow rapidly by opening a network of points of sale which, even if not owned by it, will be subject to its control and will spread its image and its products. Consequently, the affiliate will be able to undertake an economic activity, taking advantage of a brand and a format already tried and tested with lower risks.

When using the commercial affiliate agreement

The commercial affiliation contract is suitable for any company that has already consolidated a winning format and is inclined towards rapid expansion. This is the case of a successful restaurant that has developed recipes and winning business management techniques and wants to expand territorially but does not have the economic resources or local knowledge to do so. It is also suitable for those who want to start a new business but do not want to start from scratch, and prefer to use a working formula and get help in the management.

If the activity carried out by the parent company (franchisor) consists in the production of products that will be distributed to the franchisees and resold by the latter, it is a production franchise. For example, in the clothing sector, this is the case of the brand shop that resells the products of the parent company respecting the format. If the parent company, on the other hand, does not distribute any product, but offers services necessary for the franchisor’s business, it is a service franchise. For example, in the real estate or tourism sector where service packages created and already tested by the parent company are sold.

This contract should not be used if the parent company does not intend to replicate its commercial formula but only wants to distribute products through third party resellers. In this case, you need to use documents such as the distribution agreement or the consignment agreement.

What does the model franchise agreement contain?

Our franchise agreement meets all legal requirements. The main clauses included concern:

  • Product description: the description of the products or services that the parent company markets, which may include any attachments, drawings, additional technical specifications
  • Commercial formula: the franchising model or the know-how, the use of trademarks and distinctive signs (signs, drawings, etc.), as well as any assistance services provided by the parent company
  • Obligations of the franchisee: to regulate the minimum purchase levels, the required quality standards and the methods of procurement of raw materials and services
  • Duration of the relationship: for a fixed or indefinite period, with the possibility of automatic renewal
  • Fee: fixed or variable fees (royalties) and any entry fees can be indicated
  • Guarantees: the possibility of requesting a surety from the affiliate or the achievement of certain minimum results
  • Exclusive: to grant the franchisee the exclusivity on a specific area
  • Investment: the amount and description of the expenses required to start the business
  • Method of withdrawal and termination: to regulate how and in what cases the relationship between the parties can be concluded.

At the end of the interview, we will guide you step by step through all the necessary subsequent steps.

Necessary Information

All the parties’ data and franchise details are required to complete the contract.

The document can be modified in all its parts without time limits. Don’t worry so if you don’t have all the information available during the interview, you can always enter it later.

Other Names

  • Production or distribution franchise
  • Service Franchise
  • Clothing franchise
  • Catering franchise
  • Sales account franchise
  • Telephony franchise

Other useful templates and facsimiles

  • Commercial Lease Agreement: to rent a property for uses other than residential (e.g. shop, office)
  • Estimation Contract or Sales Account: to deliver products to a reseller who will pay the price only after having sold them to the end customer
  • Distribution Agreement:  to entrust a person with the purchase of goods or services and then revise them to third parties in a specific territory
  • Contract for the Periodic Supply of Goods: to regulate the supply of goods between suppliers and their customers
  • Trademark Registration: to register a national, European or international trademark

 

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