Checklist for Franchise Performance Criteria

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					Checklist for Franchise Performance Criteria
Performance criteria are an important means by which franchisees can be assessed
and incentivised particularly in terms of reduced fees, renewal and extension of terms
and opportunities for new or expanded territories and outlets. Among the matters to
which franchisors should think about when setting performance criteria are the
following:

            Minimum sales requirements

            Minimum purchase requirements

            Minimum inventory requirements

            Minimum advertising expenditures

            Performance required in order to maintain franchise/exclusivity

            Procedure to establish future performance criteria:
                       Never less than…
                       Determined by franchisor
                       Determined by negotiation
                       Arbitration/mediation
                       Right to terminate for failure to agree
                       Increases may be by percentage each time period unless
                       otherwise agreed/set/determined

            Failure to meet performance criteria:
                        Ability to pay (or purchase more products for inventory) to
                        maintain exclusive rights (if criteria relate to “sales” rather than
                        “purchases”)
                        If exceed minimum, can excess be carried forward as
                        credit/part credit towards performance criteria for the next one
                        or more time periods.

            Date by which first orders must be received

            Inflation factors.