Franchise is a type of business wherein a parent company provides its business model and brand name to a third party known as franchisee. A franchise is owned and operated by individuals but branded and overseen by much larger multinational companies. A franchise agreement is a legal document that includes the rights and obligations of the franchisor and franchisee. The agreement binds both the parties together. There is no specific Indian law exclusively dealing with the franchise business, however, there are different law which govern franchise agreement, such as the Indian Contract Act which govern the fundamental aspect of contractual obligation between the franchisor and franchise. Other law that regulate such agreements are- Competition Act, 2002; Foreign Exchange Management Act, Intellectual Property Law, Arbitration and Conciliation Act, 1996, etc. A franchise agreement must include the amount of franchise fee that is required to avail the rights of the franchisor’s trademark and operating system. In the agreement the franchisor must also mention the marketing commitment and what a franchisee is required to pay for the marketing of that particular brand to which the business is associated. The franchise agreement also includes copyright clause which includes the trademark, copyright and other confidential information of the franchisor and the company. This provision not just grant relevant rights to the franchisees to use the intellectual property but also reserve the franchisor’s right to protect the infringement of his assets. The agreement must also mention the territorial extends to which the franchisee could exercise his/her right. The other clauses the franchise agreement must necessarily include are duration of the agreement, terms of renewal or termination of the agreement, and the right to resale the franchise.
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