Franchise Contracts: Name, Property, Purchasing and Accounts
The next important issue in the contract is the ownership of the name and the set of property belonging to the franchise. The franchise agreement must specify that the brand name belongs to the franchise but not to the branch to restrain it from having an opinion on it or abusing it for any reason. For example, no one can claim in any court that "I have had this branch for 50 years and I own its name." In the branch sale contract, it should be mentioned that all intellectual and non-intellectual rights and the ownership of this collection belong to the head office.
In the contract, specify how much the franchisee has the right to provide a property; is s/he allowed to rent or buy the property or be done under the head office's direct supervision? The specifications of the property considered to start a franchise business must also be clarified in the contract. Another issue considered in the contract is the provision of raw materials and purchases for the branch.
It should be clarified whether a branch is allowed to make some purchases independently or even if it needs water, it should be supplied by the head office and all branches should follow the same standard. Some franchisors allow branches to obtain some raw materials from elsewhere, but some of the raw materials are supplied by the head office. At McDonald's, for instance, there is almost nothing a branch can provide from other sources, and the head office supplies everything.
The next issue related to franchise contracts is the confidentiality; the contract should principally be concluded between two parties and should not be revealed to any other person or competitor. In fact, the contract is part of the rights of the franchisor and the copyright, the terms of which should not be revealed anywhere. The next issue is the credit guarantee that is taken from individuals.
Sometimes, the people who buy the franchise get a company involved and that registered company buys the branch and there is no individual responsibility, but the legal responsibility of those companies. To protect themselves and increase the branch owner's responsibility, the smart franchise startups also would use the individual credit of the person to make him/her responsible and personally accountable if there were a problem, and the responsibility is not solely assigned to the company.
The contract explains the accounting system and its form and method. These explanations include: how long should the information be stored? How and where are the accounts kept?