International Franchise Agreement

International Franchise Agreement

What is an International Franchise Agreement in India?

A contract whereby the franchiser grants the franchisee (based in another country), in exchange for direct or indirect financial compensation, the right to exploit a package of industrial or intellectual property rights, primarily relating to know-how and commercial symbols, as well as the right to receive ongoing commercial or technical assistance for the duration of the contract, is typically described as an international franchise agreement.

What are the key elements of International Franchising in India?

International Franchise Agreement

The following features of the franchise relationship can be simplified down to the essentials of a franchise agreement. 

For The Franchiser: 

  • The licencing of knowledge is represented in regularly updated operational manuals, with a training support system 
  • The licencing of logos and trademarks 
  • The offering of support for management and distribution.

For The Franchisee:

  • Paying initial and recurring fees in exchange for the right to utilise these intangible assets
  • the franchiser exercising appropriate quality controls over the franchisee to safeguard its intellectual property rights.
  • taking of training programmes offered by the franchiser 
  • usage of a franchiser’s logos and trademarks 
  • adherence to the franchiser’s commercial criteria with strictness 
  • the disclosure to the franchiser of any difficulties that might arise or improvements that would seem appropriate.

Therefore, for both parties, this is an agreement which is a mechanism for resolving conflicts, which includes serving notices of defaults and providing opportunities for remedy.

What are the types of International Franchising in India?

There are numerous ways that a franchise system can go international. In the traditional method, the franchiser establishes a completely owned business or selects a master franchise in another country to plan a domestic franchising network. Directly appointing franchisees in another country is another option.

Below are the 4 types of International Franchise types.

International Franchise Agreement For Individual Units – The franchiser grants the franchisee the sole authority to market and sells its goods and services in locations that are similar in furnishing and equipment. Also, the ability to exploit any intellectual property owned by the franchiser matters. Additionally, it offers the technical and financial support necessary for precise distribution, along with the Franchise Manual. 

Master Franchise Agreement – This is a contract between a master franchisee and a franchiser. This contract grants the Master Franchisee the power to own and manage many units as well as the ability to sub-franchise to other independent companies for a set period in a particular territory. Furthermore, they frequently have much better knowledge of and connections to the business and culture of the assigned territory.

Area Executives Franchise Agreement – Hire Area Representatives to operate as a go-between for the Franchiser and Franchisees who sign a representation agreement with the Franchiser. The area Representative’s primary responsibilities include assessing, recommending, and procuring potential franchisees to the Franchiser as well as offering certain services to Unit Franchisees within its designated Territory, such as training, site selection, grand opening assistance, and ongoing support.

Joint Ventures Or Subsidiaries – Consider establishing a subsidiary they control in the target area or a joint venture with a local partner who is familiar with the market to share risks and expertise for the establishment and development of the franchiser’s system.

About International Licensing Agreement in India

Licensing agreement is an opportunity which allows other companies to protect their material ownership like Trademark & logo, design, intellectual property as well as patent rights.  The licensee does not have any rights regarding the manufacturing of the product.  Instead, they will need to pay a fee in exchange to use it.

Likewise, International Licensing Agreement plays an essential part in global business growth.  Furthermore, it enables companies operating in one location to gain access to other market areas with ease.

Here are some pointers you need to keep in mind when it comes to International Licensing Agreement.

  • Choose the appropriate location – Identifying the correct location is a crucial element to avoid any later disputes.  Every country has a different set of laws so it will always be better to consult a consultant or advisor who helps you best choose the venue where the laws fit in rightly.
  • Parties who can use the protected items – The agreement should state which parties can use the protected property.  This is a vital component which is useful in case there are any disputes.
  • Generating a survival clause – Most agreements should include a survival clause which means treating the agreement as a continuous relationship which requires care and nurturing to achieve the required goals.
  • Assessment – Licensing agreements are a crucial asset of any business.  When you want to franchise your business in India, it is essential to have this as part of the required documentation for the franchisee.

What are the Merits of International Franchise in India?

Many benefits come along while considering international franchising in India.  Below are a few.

  • Lower Risk – There is a greater likelihood of success and less risk because the business model is successful in the country of origin. As a result of the company’s successful operations, products, and services, favourable growth in international markets is possible.
  • Financing – A franchise is a company which is put to the test and is successful. Therefore, investing in a global franchise business is a safer choice. As far as obtaining bank loans, this makes financing considerably simpler.
  • Brand Awareness– The brand is known internationally. The business itself would have already handled the marketing for the global franchise. Customers typically prefer to purchase goods from a reputable and well-known brand. Sales will therefore increase starting at the very beginning.
  • Franchiser Assistance – In every aspect of your business, the franchiser will act as a support system for you. You require the most supervision to run a franchise business successfully, especially if the company’s origin is in another nation. In every way, the franchiser will direct and help you.
  • Sufficient Franchise Training – No prior expertise in the field or company. The franchisers will provide enough training to you and your staff so that you may successfully manage a global franchise firm.

Key Takeaways

The development of an appropriate international franchise agreement is the cornerstone for every business that wants to expand internationally and operate in numerous geographies. 

At Sparkleminds, we make sure that both sides are balanced. The agreements are written in such a way that the brand and franchisers are never jeopardised. The franchisee is also at peace because they do not have to worry about unneeded issues that are unrelated to their tasks. The healthy relationship that results from this balance inspires the parties to stay together over the long term.  Give us a call today to know more about International Franchising in India.