Master Franchise Agreement
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Master Franchise Agreement
Master franchising is popular with service franchises. Service franchises are those which involve the franchisee selling services rather than goods. Service franchises are common in the home services, cleaning and courier industries. Often there will be no retail premises involved, with the franchisee operating from home. The use of a vehicle will be a critical element of the franchise.
A feature of service franchises is the high number of individual franchisees. To avoid creating a large head office bureaucracy master franchising can be used to delegate the responsibility of growing, developing and monitoring the network in a territory to a master franchisee.
The grant of a master franchise is very similar to the grant of a franchise. However, the terms of the master franchise and the responsibilities of the master franchisee are different from those of a franchisee. A franchisor must provide a master franchisee with a disclosure document, a cooling off period and other arrangements applicable to franchisees under the Code.
While a master franchisee is entitled to receive a disclosure document, the Code is not clear about whether it must also provide one to franchisees. The better practice is to do so, particularly if the master franchisee is a party to the franchise agreement.
Structure of Master Franchise
The master franchise arrangement can be structured in such a way that the master franchisee can be a prime contracting party, an agent of the franchisor, or a joint contracting party. The franchisor will normally wish to protect the business format, systems and image that the franchisor has developed, but otherwise the nature of the master franchising arrangement can be structured to suit the needs of the particular network.
When creating master franchise arrangements consider the prohibition of Pyramid selling schemes in Division 3 of the Australian Consumer Law. This prohibition may well render some methods of master franchising illegal.
Content of master franchise agreements
The Code imposes the same obligations upon a franchisor concerning the content of a master franchise agreement as apply to the content of a franchise agreement. A ‘franchisee’ is defined in clause 3 of the Code to include ‘a subfranchisor in its relationship with a franchisor’.
2 PRIMARY ACKNOWLE DGMENTS
4 GRANT OF MASTER FRANCHISE
5 CONDITIONS PRECEDENT
6 TERM & TERMINATION
7 DUTIES OF THE FRANCHISOR
8 DUTIES OF THE MASTER FRANCHISEE
9 RECRUITMENT AND MANAGEMENT OF FRANCHISEES
10 AUTHORITY TO GRANT FRANCHISES
13 FRANCHISE FEES
14 SUPPLY OF STOCK
15 PRODUCT WARRANTIES
16 DUTIES OF THE MASTER FRANCHISEE
17 ADVERTISING, MARKETING & PROMOTION
19 INSURANCE & INDEMNITY
20 FINANCIAL REPORTING
21 INSPECTION AND AUDIT OF FINANCIAL RECORDS
22 CONFIDENTIALITY & NON-DISCLOSURE
23 OPERATIONS MANUAL
26 EFFECT OF TERMINATION
28 FRANCHISING CODE OF CONDUCT
29 RELATIONSHIP OF PARTIES 25
30 ENTIRE AGREEMENT
31 GOVERNING LAW
32 FORCE MAJEURE
34 DISPUTE RESOLUTION
35 SERVICE OF NOTICES
38 COST AND (STAMP) DUTY
39 FURTHER ASSURANCE
40 INJUNCTION & INTERLOCUTARY RELIEF
41 WARRANTIES AND RESPRESENTATIONS OF MASTER FRANCHISEE
42 DIRECTORS GUARANTEE
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