Indemnity Franchise Agreement
All franchise contracts include a compensation contract, which means that the franchisee reimburses the franchisor for any losses resulting from negligence or misconduct on the part of the franchisee. These alliances are almost always one-sided in favour of the franchisor — which is fair since it is the franchisee and not the franchisor who is responsible for the day-to-day operation and maintenance of the business. Another example: if a compensation clause in favour of the franchisor is too broad and goes beyond the necessary protection of the franchisor, it can be declared abusive. This can lead to the ineforceable of the entire compensation clause, which means that the franchisor loses the protection of being compensated for the remainder of the time remaining in the franchise agreement. On the other hand, if the compensation clause were appropriate and not unfair, the franchisor would continue to benefit from safeguard clauses under the compensation clause. The “Grant” section informs franchisees that the franchisor grants them the limited, non-transferable and non-exclusive right to use the marks, logos, service marks (usually called trademarks) and the franchisor`s operating system (often referred to as the system) for the period set by the franchise agreement. The franchisor does not obtain any ownership of the trademarks or system and the franchisor still reserves the right to terminate the franchisee`s licence due to a breach of the franchise agreement. The franchise ownership model is based on the goodwill established in the franchise company, the franchisor`s brand. In essence, the franchisee pays the right to use the franchisor`s brand, especially its brands. Of course, this right is not unlimited and the franchise agreement contains a multitude of restrictions and controls on how the franchisee can use the franchisor`s brand.
All franchise agreements require the franchisee to have insurance to cover its activities. In all cases, each franchisee`s insurance policy requires the franchisor to be designated as “additional insured,” meaning that the franchisor has the same coverage as the franchisee, although the franchisor does not pay for the coverage. Buying a master franchise is a very different offer from buying a… The franchise rule requires that a potential franchisee be delivered with a Disclosure Document (FDD) franchise that describes 23 “items” related to the franchisor`s activity. An FDD aims to give potential franchisees a clear picture of the activities of the franchisor, its executives and other franchises. Some of the 23 “points” required include past or ongoing franchise litigation, the financial health of the franchise, training and other support programs made available to franchisees by the franchisor, a list of existing franchise outlets, and the franchise`s trademarks, copyrights and patents. A non-competition clause and an agreement to prevent the franchisee from opening a business that would compete with the franchise. Almost all franchised agreements will have non-competitive agreements. The alliance is often broken into two parts: the “long-term” confederation; and the “post-term” federation. The compensation provision in that case required the applicant to “compensate the franchisor for the defence costs (including legal and client fees and all administrative costs related to the preparation and transfer of such a defence) incurred by the franchisor with respect to “any claim or action” of the franchisee “with respect to documentation and/or any other matter.”