Comprehensive Franchise Agreement by svirani

VIEWS: 372 PAGES: 46

Drafted by a lawyer, this agreement addresses issues that are relevant to any business that wishes to establish a franchise in Canada.

More Info
									                        ®
   [FRANCHISOR]



FRANCHISE AGREEMENT

       Among

   [FRANCHISOR].

         And

 [Name of Franchisee]

         And

 [Name of Guarantors]
                                                     TABLE OF CONTENTS

                                                                                                                                               Page


1.   DEFINITIONS AND INTERPRETATION ........................................................................................ 1
     1.1        Recitals .............................................................................................................................. 1
     1.2        Definitions .......................................................................................................................... 1
     1.3        Headings ............................................................................................................................ 5
     1.4        Currency ............................................................................................................................. 5
     1.5        Calculation of Time ............................................................................................................ 5
     1.6        Severability......................................................................................................................... 5
     1.7        Time of the Essence .......................................................................................................... 5
     1.8        Governing Law ................................................................................................................... 5
2.   COVENANTS, REPRESENTATIONS, AND WARRANTIES OF THE FRANCHISEE ................... 5
     2.1        Covenants, Representations and Warranties .................................................................... 5
3.   GRANT OF LICENCE ..................................................................................................................... 6
     3.1        Grant of Licence ................................................................................................................. 6
     3.2        Personal Licence ................................................................................................................ 6
     3.3        Exclusive Territory.............................................................................................................. 7
     3.4        Reservation of Rights ......................................................................................................... 7
4.   INITIAL TERM AND OPTIONS TO RENEW .................................................................................. 7
     4.1        Initial Term ......................................................................................................................... 7
     4.2        Options to Renew............................................................................................................... 7
5.   SELECTION, DEVELOPMENT AND OPENING OF THE STORE ................................................ 8
     5.1        Use of Store ....................................................................................................................... 8
     5.2        Approval of Store location .................................................................................................. 8
     5.3        Selection of Store Location ................................................................................................ 8
     5.4        Lease of Store .................................................................................................................... 9
     5.5        Terms of Lease .................................................................................................................. 9
     5.6        Approved Location and Lease; Option to Terminate ......................................................... 9
     5.7        Development of Approved Location by Franchisee ......................................................... 10
     5.8        Development of Approved Location by Franchisor .......................................................... 10
     5.9        Franchisee Assistance ..................................................................................................... 10
     5.10       Location Development Price ............................................................................................ 11
     5.11       Opening for Business; Option to Terminate ..................................................................... 11
     5.12       Relocation ........................................................................................................................ 11
     5.13       Equipment ........................................................................................................................ 12
     5.14       Development of Market .................................................................................................... 12
6.   FRANCHISE FEE AND ROYALTIES ........................................................................................... 12

                                                                       -i-
                                                      TABLE OF CONTENTS
                                                          (continued)
                                                                                                                                              Page


      6.1         Franchise Fee .................................................................................................................. 12
      6.2         Royalty Fee ...................................................................................................................... 13
      6.3         Payment Method .............................................................................................................. 13
      6.4         Automatic Payments ........................................................................................................ 13
      6.5         Applicable Taxes .............................................................................................................. 13
7.    MANUAL ....................................................................................................................................... 13
      7.1         Confidential Operating Manual ........................................................................................ 13
      7.2         Modifications to Manual ................................................................................................... 13
      7.3         Confidentiality................................................................................................................... 13
8.    ACCOUNTING AND REPORTING ............................................................................................... 14
      8.1         Books and Records .......................................................................................................... 14
      8.2         Statements and Reports .................................................................................................. 14
      8.3         Systems and Programs .................................................................................................... 15
      8.4         No Waiver ........................................................................................................................ 15
      8.5         Examination and Audit ..................................................................................................... 15
      8.6         Failure to Deliver Statement of Gross Revenue .............................................................. 16
      8.7         Authorization to Collect Data ........................................................................................... 16
9.    TRAINING AND ASSISTANCE .................................................................................................... 16
      9.1         Pre-Opening Training Program ........................................................................................ 16
      9.2         Opening Assistance ......................................................................................................... 16
      9.3         Ongoing Training and Conferences ................................................................................. 16
      9.4         Employees ....................................................................................................................... 17
      9.5         Standard Support Services .............................................................................................. 17
      9.6         Additional Support Services ............................................................................................. 17
10.   QUALITY, UNIFORMITY AND STANDARDS .............................................................................. 17
      10.1        [Franchisor] Image ......................................................................................................... 17
      10.2        Authorized Products and Services ................................................................................... 18
      10.3        Minimum Inventory Levels ............................................................................................... 18
      10.4        Conformity with Standards ............................................................................................... 18
      10.5        Modifications to System ................................................................................................... 18
      10.6        Improvements by Franchisee ........................................................................................... 19
      10.7        Standards of Service ........................................................................................................ 19
      10.8        Rebates and Other Benefits; Mark-ups............................................................................ 20
      10.9        Suggested Prices ............................................................................................................. 20
      10.10       Operating Principal and Operating Manager ................................................................... 21

                                                                       -ii-
                                                      TABLE OF CONTENTS
                                                          (continued)
                                                                                                                                               Page


      10.11      Management and Operation of Store ............................................................................... 21
      10.12      Inspection of Store ........................................................................................................... 21
11.   [FRANCHISOR] NAMES AND MARKS AND CONFIDENTIAL INFORMATION ......................... 22
      11.1       Ownership ........................................................................................................................ 22
      11.2       Goodwill ........................................................................................................................... 22
      11.3       Use of [Franchisor] Names and Marks .......................................................................... 22
      11.4       Notice of Authorized User ................................................................................................ 22
      11.5       Notice of Infringement ...................................................................................................... 23
      11.6       Indemnity .......................................................................................................................... 23
      11.7       Cease Use on Termination .............................................................................................. 23
      11.8       Confidential Information ................................................................................................... 23
      11.9       Injunctive Relief ................................................................................................................ 23
12.   ADVERTISING .............................................................................................................................. 24
      12.1       Advertising Fee and Ad Fund .......................................................................................... 24
      12.2       Payment ........................................................................................................................... 24
      12.3       Use of Ad Fund ................................................................................................................ 24
      12.4       Benefit of Ad Fund ........................................................................................................... 24
      12.5       Local Advertising .............................................................................................................. 24
      12.6       Participation in Promotional Programs............................................................................. 25
      12.7       Telephone Listing ............................................................................................................. 25
      12.8       Website ............................................................................................................................ 25
13.   INSURANCE AND INDEMNITY ................................................................................................... 25
      13.1       Insurance ......................................................................................................................... 25
      13.2       Franchisor’s Option to Obtain Insurance ......................................................................... 25
      13.3       Group Insurance .............................................................................................................. 26
      13.4       Franchisee to Report Claims ........................................................................................... 26
      13.5       Indemnity .......................................................................................................................... 26
14.   RESTRICTIVE COVENANTS ....................................................................................................... 26
      14.1       Non-Compete ................................................................................................................... 26
      14.2       Exception ......................................................................................................................... 27
      14.3       Non-Solicitation of Business and Customers ................................................................... 27
      14.4       Non-Solicitation of Employees ......................................................................................... 27
      14.5       Reasonableness .............................................................................................................. 27
15.   TRANSFERS ................................................................................................................................ 27
      15.1       Transfer by Franchisor ..................................................................................................... 27

                                                                      -iii-
                                                       TABLE OF CONTENTS
                                                           (continued)
                                                                                                                                                 Page


      15.2        Transfer by Franchisee .................................................................................................... 28
      15.3        Transfer of Shares ........................................................................................................... 29
      15.4        Ongoing Liability............................................................................................................... 29
      15.5        Franchisor’s Right of First Refusal ................................................................................... 29
      15.6        No Waiver of Claims ........................................................................................................ 30
16.   TERMINATION ............................................................................................................................. 30
      16.1        No Termination By Franchisee ........................................................................................ 30
      16.2        Termination Without Notice .............................................................................................. 30
      16.3        Termination With Notice ................................................................................................... 31
17.   OBLIGATIONS UPON TERMINATION OR EXPIRATION ........................................................... 32
      17.1        Payment of All Amounts ................................................................................................... 32
      17.2        Cease to Use Names and Marks ..................................................................................... 32
      17.3        Transfer of Telephone Numbers ...................................................................................... 32
      17.4        De-Branding of Approved Location .................................................................................. 32
      17.5        Right to Purchase Assets ................................................................................................. 32
      17.6        Survival of Certain Obligations ......................................................................................... 33
      17.7        Cross-Default ................................................................................................................... 33
      17.8        Acceleration of Indebtedness ........................................................................................... 33
18.   GUARANTORS ............................................................................................................................. 33
      18.1        Guarantors ....................................................................................................................... 33
      18.2        General Security Agreement ............................................................................................ 33
19.   ADDITIONAL REMEDIES ............................................................................................................. 34
      19.1        General Security Agreement ............................................................................................ 34
      19.2        Overdue Amounts ............................................................................................................ 34
      19.3        Operation of Franchised Business by Franchisor ............................................................ 34
      19.4        Injunctive Relief ................................................................................................................ 35
20.   NOTICE ......................................................................................................................................... 35
      20.1        Notice ............................................................................................................................... 35
21.   MISCELLANEOUS........................................................................................................................ 36
      21.1        No Withholding ................................................................................................................. 36
      21.2        Rights Cumulative ............................................................................................................ 36
      21.3        Independent Contractor ................................................................................................... 36
      21.4        Entire Agreement ............................................................................................................. 36
      21.5        Force Majeure .................................................................................................................. 36
      21.6        Further Assurances; Power of Attorney ........................................................................... 37

                                                                        -iv-
                                         TABLE OF CONTENTS
                                             (continued)
                                                                                                                          Page


21.7   Successors and Assigns .................................................................................................. 37
21.8   Language of Agreement .................................................................................................. 37




                                                        -v-
                                          [FRANCHISOR]

                                     FRANCHISE AGREEMENT

THIS AGREEMENT entered into this <*> day of <*>, 200<*>,

AMONG:

               [FRANCHISOR], a corporation existing under the laws of the Province of
               Ontario (the “Franchisor”),

               -and-

               [Name of Franchisee], a corporation existing under the laws of <*> (the
               “Franchisee”),

               -and-

               [Name of Guarantor] and [Name of Guarantor], each an individual
               residing in <*> (the “Guarantors”).

WHEREAS:

1.     The Franchisor has developed the [Franchisor] System and is engaged in the business of
       operating [Franchisor] Stores and granting to qualified persons the right and licence to operate
       franchised [Franchisor] Stores using the [Franchisor] System and the [Franchisor] Names and
       Marks, all on a non-exclusive basis;

2.     [Franchisor] Stores are identified and distinguished by a unique and standardized design, decor
       and signage and by uniform operating procedures and a uniformly high quality of Products and
       services;

3.     The Franchisor has valuable knowledge of suppliers who are able to provide Products of a quality
       which is acceptable to the Franchisor;

4.     The Franchisee has applied to the Franchisor for a grant of a licence to operate a franchised
       [Franchisor] Store as a [Franchisor] franchisee; and

5.     The Franchisor is prepared to grant to the Franchisee a non-exclusive licence to operate a
       franchised [Franchisor] Store using the [Franchisor] System and the [Franchisor] Names and
       Marks, in reliance upon information disclosed in the Franchisee’s application for a [Franchisor]
       franchise, upon and subject to the terms and conditions set forth in this Agreement;

NOW THEREFORE, in consideration of the premises and the mutual covenants, representations,
warranties, and payments herein set out, and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties agree as follows:

1.     DEFINITIONS AND INTERPRETATION

1.1    Recitals. The parties acknowledge and agree that the foregoing recitals are true and correct
       both in substance and in fact.

1.2    Definitions. Wherever used in this Agreement, unless there is something in the subject matter or
       context inconsistent therewith, the following words and terms have the respective meanings given
       to them as follows:



                                                  1
“Ad Fund” has the meaning given to it in Section 12.1;

“Advertising Fee” has the meaning given to it in Section 12.1;

“Affiliate”, or “Affiliate of the Franchisor” means:

(i)     any individual who is related by blood or marriage to the shareholder or shareholders of
        the Franchisor;

(ii)    any corporation or other entity any of whose shares or interests are owned by the same
        shareholder or shareholders of the Franchisor or by any individual who is related by
        blood or marriage to such shareholder or shareholders;

(iii)   any corporation or other entity in which the Franchisor owns any shares, or has an
        ownership interest; or

(iv)    any individual, corporation, or other entity which owns shares or any other ownership
        interest in the Franchisor;

“Agreement” means this Franchise Agreement and all instruments that supplement or amend
this Franchise Agreement;

“Approved Location” has the meaning given to it in Section 5.4;

“[Franchisor] Names and Marks” means the trade name(s) and/or trademark(s) listed in
Schedule A, together with such other trade names, trade marks, symbols, logos, distinctive
names, service marks, certification marks, logo designs, insignia or otherwise which may be
designated by the Franchisor from time to time as part of the [Franchisor] System for use by
franchisees, and not thereafter withdrawn;

“[Franchisor] Stores” means retail outlets carrying on business under the [Franchisor] Names
and Marks and using the [Franchisor] System;

“[Franchisor] System” means the standards, systems, concepts, identifications (including
without limitation the [Franchisor] Names and Marks), methods and procedures developed and
used by the Franchisor, or which may hereafter be developed and used by the Franchisor, for the
sale of Products and services and the establishment, management and operation of businesses
specializing in the sale of Products and services, as set out in the Manual or otherwise, as may
be added to, changed, modified, withdrawn or otherwise revised by the Franchisor, in its sole
discretion and includes, without limiting the generality of the foregoing:

(i)     the distinguishing characteristics relating to the basic image, design, appearance, layout
        and colour scheme of the interior and exterior of the Store;

(ii)    the design, style, colour and other distinguishing characteristics of the fixtures,
        showcases, signs, and furnishings;

(iii)   the methods of selecting, purchasing, marketing, displaying and selling the Products; and

(iv)    the standards of quality, service, and cleanliness in the operation of the Franchised
        Business;

“[Franchisor]” has the meaning given to it in Section 10.1;




                                             2
“Equipment” means the equipment, fixtures, signs, supplies, display materials, decorations and
accessories located at or installed in the Store;

“Exclusive Territory” has the meaning given to it in Schedule A hereto;

“Franchised Business” means the business of the sale of Products and services carried on by
the Franchisee at the Store, under licence hereunder from the Franchisor and pursuant to the
terms of this Agreement;

“Franchise Fee” has the meaning given to it in Section 6.1;

“General Security Agreement” means the Franchisor’s standard form of General Security
Agreement in effect from time to time;

“Gross Revenue” means, the total amount of all sales and other income from whatever source
(whether it be of a retail, wholesale, or other nature), derived from conducting the Franchised
Business, whether or not such amounts are collected and whether payment is made by way of
cash, credit or otherwise. Without limiting the generality of the foregoing, Gross Revenue will
include:

(a)     all sales made pursuant to telephone or e-mail or other similarly placed orders;

(b)     the amounts of all sales assumed to have been lost by the interruption of the Franchised
        Business and which is the basis upon which an insurer has paid a claim under the Store’s
        business interruption insurance; and

(c)     all sales made in any part of the premises in which the Franchised Business is located.

The following will not be included in calculating Gross Revenue:

(1)     the amount of any tax imposed by any federal, provincial, municipal or other
        governmental authority on sales and collected from customers, provided that the amount
        of any such tax is shown separately and in fact paid by the Franchisee to the appropriate
        governmental authority; and

(2)     an exchange of Products made between the Franchisee and a customer, provided that
        the amount paid for the Products by the customer was originally included in calculating
        Gross Revenue.

In calculating Gross Revenue, the following will be deducted therefrom:

(A)     the amount of any cash refunded to a customer on account of the return of any Products
        provided that the amount refunded in respect of such Products was originally included in
        calculating Gross Revenue; and

(B)     an amount equal to the value of any discount given to a customer on account of the
        purchase of any Products or services through the use of coupons or other similar type
        promotions approved by the Franchisor, provided that the sale upon which the discount is
        given was recorded at full value in calculating Gross Revenue.

No allowance will be made for bad debts. Each sale of Products or services made upon
instalment or credit will be treated as a sale at the full price at the time such Products or services
are delivered and/or provided, irrespective of the time when the Franchisee receives payment
therefor;




                                              3
“Guarantee Agreement” means the Franchisor’s standard form of Guarantee Agreement in
effect from time to time;

“Guarantor” means such of the officers, directors, shareholders and principals of the Franchisee,
as determined by the Franchisor, who will be required to guarantee the obligations of the
Franchisee to the Franchisor under 
								
To top