MASTER FRANCHISE AGREEMENT

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What is included

The Master Franchise Agreement

What It Is, And When To Use It.

A master franchise agreement is typically used when a business owner wants to sell franchises in their company. The agreement will outline the rights and responsibilities of both parties.

This type of agreement allows one party to sell products or services under another’s brand name.

In order to protect themselves against fraud, some businesses require prospective franchisees to sign a master franchise agreement before entering into negotiations with them.

Master Franchise Agreement Includes:

Information Statement

Legal Drafting Bookelt

Schedule

Franchise Checklist

Disclosure Document

Full Commentary with Update

1 Definitions 1

2 PRIMARY ACKNOWLEDGMENTS 4

4 GRANT OF MASTER FRANCHISE 5

5 CONDITIONS PRECEDENT 5

6 TERM & TERMINATION 6

7 DUTIES OF THE FRANCHISOR 8

8 DUTIES OF THE MASTER FRANCHISEE 8

9 RECRUITMENT AND MANAGEMENT OF FRANCHISEES 9

10 AUTHORITY TO GRANT FRANCHISES 10

12 REPORTING 11

13 FRANCHISE FEES 13

14 SUPPLY OF STOCK 13

15 PRODUCT WARRANTIES 14

16 DUTIES OF THE MASTER FRANCHISEE 15

17 ADVERTISING, MARKETING & PROMOTION 1

19 INSURANCE & INDEMNITY 18

20 FINANCIAL REPORTING 19

21 INSPECTION AND AUDIT OF FINANCIAL RECORDS 19

22 CONFIDENTIALITY & NON-DISCLOSURE 20

23 OPERATIONS MANUAL 20

24 ASSIGNMENT 20

25 TERMINATION 21

26 EFFECT OF TERMINATION 23

27 NON-COMPETE 23

28 FRANCHISING CODE OF CONDUCT 24

29 RELATIONSHIP OF PARTIES 25

30 ENTIRE AGREEMENT 25

31 GOVERNING LAW 25

32 FORCE MAJEURE 25

33 INTERPRETATION 25

34 DISPUTE RESOLUTION 26

35 SERVICE OF NOTICES 27

37 SEVERABILITY 28

38 COST AND (STAMP) DUTY 28

39 FURTHER ASSURANCE 28

40 INJUNCTION & INTERLOCUTARY RELIEF 28

41 WARRANTIES AND RESPRESENTATIONS OF MASTER FRANCHISEE 28

42 DIRECTORS GUARANTEE 29

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Suitability

1. General Law Governing Franchising

The term ‘franchising’ is normally used in connection with either a business format
form of franchise or in connection with a product and trade mark franchise. Under a
business format form of franchise, the Franchisor grants to the franchisee not only
the right to use the franchisor’s trade marks but also the right to use an entire
business format in accordance with which the franchisee must carry on their
business.
Franchising in Australia is governed by the Franchising Code of Conduct. The
Franchising Code of Conduct is a mandatory industry code of conduct that has the
force of law under the Competition and Consumer Act 2010 (Cth).
The definition of ‘franchise agreement’ in the Franchising Code of Conduct is
wide. An agreement exhibiting the features specified in Clause 4(1) of the Code, will
be a franchise agreement for the purposes of the Code.

2. The Code
The Franchising Code of Conduct is contained in a Schedule to the Trade Practices
(Industry Codes — Franchising) Regulations 1998 (the Code). A Franchising Code
of Conduct compliance manual for franchisors and master franchisees is available
free of charge from the Australian Competition and Consumer
Commission website www.accc.gov.au.

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Preview Sample

MASTER FRANCHISE AGREEMENT

What is a Master Franchise Agreement

A Master Franchise Agreement is a specialised type of franchise agreement in which a franchisor grants a master franchisee the rights to develop and operate multiple franchise units within a specified territory, and to sell sub-franchises to other individuals or entities (sub-franchisees) within that territory. The master franchisee acts as an intermediary between the franchisor and the sub-franchisees, taking on many of the responsibilities typically held by the franchisor, including training, support, and ensuring compliance with the franchise system.

Key Elements

Key Elements of a Master Franchise Agreement

1. Parties Involved:
   • Identification of the franchisor and the master franchisee, including their legal names and contact information.
2. Grant of Master Franchise Rights:
   • Detailed description of the rights granted to the master franchisee, including the right to operate franchise units and to sell sub-franchises within the specified territory.
   • The specific territory covered by the agreement.
3. Territory:
   • The geographic area in which the master franchisee is authorized to develop and operate franchise units and sell sub-franchises.
   • Any exclusivity rights within that territory.
4. Development Schedule:
   • The master franchisee’s obligations regarding the development of franchise units within the territory, including timelines and minimum development targets.
5. Fees and Payments:
   • The financial terms, including the initial master franchise fee, ongoing royalties, and any fees from sub-franchise sales.
   • Payment schedule and method of payment.
6. Sub-Franchising Rights and Obligations:
   • The rights and responsibilities of the master franchisee regarding the recruitment, training, and support of sub-franchisees.
   • Terms for the sub-franchise agreements, which must be consistent with the master franchise agreement.
7. Franchisor’s Obligations:
   • Responsibilities of the franchisor, such as providing initial training and support to the master franchisee, supplying proprietary systems and materials, and ensuring the quality and consistency of the franchise system.
8. Master Franchisee’s Obligations:
   • Responsibilities of the master franchisee, including adhering to the franchisor’s standards, providing training and support to sub-franchisees, and maintaining the quality and reputation of the franchise.
9. Operational Standards:
   • Guidelines for operating the franchise units, including product and service standards, marketing requirements, and compliance with the franchisor’s business model.
10. Training and Support:
    • Details of the initial training programs provided by the franchisor and the ongoing support available to the master franchisee.
11. Marketing and Advertising:
    • Requirements for marketing efforts by the master franchisee and contributions to the franchisor’s national or regional advertising fund.
12. Reporting and Auditing:
    • Requirements for the master franchisee to provide regular financial and operational reports to the franchisor and provisions for the franchisor to audit the master franchisee’s and sub-franchisees’ records.
13. Confidentiality and Intellectual Property:
    • Provisions ensuring that the master franchisee and sub-franchisees maintain the confidentiality of the franchisor’s proprietary information and respect intellectual property rights.
14. Termination and Transfer:
    • Conditions under which the agreement can be terminated by either party, including notice periods and any obligations upon termination.
    • Provisions for the transfer or sale of the master franchise by the master franchisee.
15. Dispute Resolution:
    • Procedures for resolving any disputes that may arise during the term of the agreement, such as mediation or arbitration.
16. Governing Law:
    • The legal jurisdiction governing the agreement.
17. Signatures:
    • Signatures of both parties, indicating their agreement to the terms and conditions outlined in the document.

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