Legal & Essential Documents Writing for Franchise Business.

Globalization has opened a new era of entrepreneurship, an era of franchise ownership. Indian market is loaded with foreign and Indian brands such as McDonalds, KFC, Nike, Reebok, Big Bazaar (Future group) and many such brands.

What are the Documents Required?

1. Franchise Agreement

The franchise agreement is the binding contract between you and your franchisee. It explains all rights and obligations for both parties and protects the integrity of your franchise system and your trademarks. This is one of the first documents you will send to a prospective franchisee.

2. Franchise Disclosure Document

Franchisors often have a bank of information relating to their business and the franchise offering. It is likely this information will only be provided after a prospective franchisee has signed the confidentiality or intent to proceed agreement. It’s also likely this information will contain details of financial performance or projections. Prospective franchisees are advised to discuss any such projections with the franchisor in order to gain a clear understanding of where the figures originated.

3. Operations Manual

Each franchise should have a manual that details the operational aspects of running the business. Franchisees are typically provided with a copy of - or access to - the manual after completion of their training and once the franchise agreement has been signed.

4. Financial Statements

If you are new to franchising and your franchise company is new then the financial statements will be limited to an opening balance sheet for your new franchise company. However, over time these financial statements must evolve into fully audited financial statements that include Statement of Operations, Balance Sheet, and Statement of Cash Flows.

5. Trademark Licence

One of the most important aspects of franchising is the franchisor’s name and brand. Often, franchisors will protect their brand - logo or trading name - via a registered trademark and it’s an important part of the due diligence process to check this.

Why Are These Documents Essential?

While franchising can be very rewarding, it is imperative that prospective franchisees are aware of their rights and obligations under the franchise documents. It is important that prospective franchisees obtain independent legal advice to ensure that the documents that have been provided to them comply with the code and so that they understand their contractual obligations for the life of the franchised business and when the franchise relationship comes to an end. Documents serve as a gateway through which your franchise can enter new markets and expand its reach; other paperwork validates your current position and provides assurance to your franchisee.

Approx. Costing for Documentation

Pricing for the documents varies from franchise to franchise. It is not fixed. There are many factors on which the pricing is decided. For example; the size of the company, complexity of documents, company’s past record, how big the franchise is, ETC. Approx pricing starts from Rs. 15,000-20,000/- INR & can go until 2-3 Lakhs.

Help & Guidance to Make It

To know more about franchising business, the documents involved and how we can help.

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