Successful Franchising Key terms of an agreement Pravin Anand Lahore, 18 th December 2007

Promises made Franchisors make promises –Of exclusivity within a certain territory –That the market is good and their system works – good money to be made –That with a pre determined investment, even without experience, there would be success –That they would continuously support the franchisee in various ways On the force of this promise SMEs invest lifetime earnings

Franchisor - obligations An accurate and detailed operations manual – critical –Living document – changes –User friendly (ring notebooks with tabs) –Detailed – (..they never told me how to do it..) eg Peanut butter sandwich –FAQs – should anticipate questions –Confidential and proprietary – licensed –Fair representation Link up like a computer network for latest updates to franchisee

Franchisor Protected IP –Registered (Patents and designs), used Trademarks) or authored (copyrights) –Not infringing third party rights –Obligation to sue - cost

Franchisee: Trade marks Franchisee will not register mark in his own name. Registration creates strong rights That he would use the mark – basis of agreement & important to protect the mark Licensee would not vary the mark or offer poor quality goods/services –Quality control (specifications, samples, inspection of inventory accounts processes) –Registered user (QC presumed) He would not export outside licensed territory

Copyright licensing Presumptions –Territory (if silent then India – relevant for global licenses) –Duration (if silent then 5 years – relevant for large repertoires of music films or books) –License lapses if right unused for one year (unless contrary contract)

Franchisee Wont manufacture or sell competing goods in course of franchise Post termination –Will respect IP –Wont compete for a reasonable time – may not be valid in some countries if no IP involved Maintain quality – even procure parts or goods from franchisor Not to hold an interest in a competitor – like a marriage

Franchisee To keep know how confidential –Physical access, IT, marking, employee contracts, action taken against violators To contribute to advertising – get prior approvals (eg Walt Disney –elephant picture) Best efforts to sell goods – (T series and Prentice Hall) License improvements to licensor Help enforce IP (local witnesses, complainant, documents and logistics)

Giant Steps taken towards IP protection

Franchisee Not to transfer the franchisee Attend training programs Not to violate any law (Building laws (MCD) or AICTE rules)

Conclusion Good faith on both sides – critical for success Good systems and good contractual terms leave no ambiguity and disputes avoided Terms must be detailed but simple to follow and gone through as a part of training for successful implementation