Learn more aside from franchising agreement: How to protect yourself in franchising your business
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At present, there is no specific law on franchising
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Franchising refers to the method of using another’s perfected business concept
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Franchising agreement is a written contract between the franchisor and the franchisee
Mutuality gives rise to a contract.
It is only when two or more persons agree to a certain thing that a contract may be created. Otherwise, there is no contract to speak of. Among the contracts that may be entered into by the consenting parties is the Franchising Agreement.
Franchising refers to the method of practicing and using another’s perfected business concept. In our previous article, it was stated that Franchising Agreement is a written contract or agreement between the franchisor and the franchisee. To put it simply, a franchisor is the owner of the business concept while a franchisee is the person who, for a consideration, is allowed by the former to use the business concept. The franchisor grants the franchisee the right to engage in the business of offering, selling, or distributing goods or services.
At present, there is no specific law on franchising. But take note that a franchising agreement is basically a contract. Thus, it is generally governed by the law on contracts. However, it is inevitable that they are governed by other related laws such as the Law on Intellectual Property. This is because, unless otherwise provided, the right of the franchisee includes the use of trademark, service mark, trade name/business name among others. If the Franchising Agreement is where either of the parties is a corporation, the law on corporation may also be resorted to in addition to the law on contracts.
What should be included in the franchising agreement (FA)?
Since there is no specific law on franchising and in line with the DTI Bureau Order No. 10-24, Series of 2010 which is the Advisory on Due Diligence to be Undertaken by a Prospective Franchisee, and for the protection of both parties, the following should be included in the franchising agreement:
- Term
- Renewal
- Invest amount and fees
- Training and support
- Purchase of products
- Territory
- Non-disclosure Clause
- Arbitration Clause
Notwithstanding the above, the franchisor and the franchisee may still agree to include other terms and conditions as they may deem necessary provided that they are within the context of the laws applicable to the agreement.
It is however important to note that the Franchising Agreement is usually drafted and prepared by the franchisor. Thus, it is advisable that the franchisee consults a lawyer before entering into any type of Franchising Agreement.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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