Before signing the franchise contract, franchisees should thoroughly understand the contents of the contract to ensure their own rights and interests. Don’t think that the franchise contract is a template issued by the headquarters and cannot be modified. In fact, the contract should be made through mutual agreement between the two parties. In other words, franchisees should not only open their eyes to see the content clearly, but also have the right to request modifications to the content. This article only provides the following ten points to note for franchisees’ reference when signing a contract.

First, the franchise headquarters should be required to produce the service mark registration certificate. Because the so-called franchise means that the headquarters authorizes the brand to be used by franchise stores. In other words, the headquarters must first own the brand before it can be authorized to franchise stores. In other words, the headquarters must first obtain the service mark registration certificate issued by the Central Bureau of Standards. Not long ago, there was a dispute over a Chinese restaurant chain system. The old and new systems went to the Fair Trade Commission. Later, the losing party was forced to change the brand name, and the franchise stores that had already joined the chain were also forced to change their names. It was really weird. Innocent! Therefore, before joining, franchisees must confirm that the headquarters indeed owns the brand before they can join with confidence.

Second, the method of payment of royalties. Generally speaking, the headquarters will charge three types of fees from franchisees, namely franchise fees, royalties and deposits. The so-called franchise fee refers to the fee charged by the headquarters to help franchisees make overall store planning and education and training before opening a store. The royalties refer to the fees that franchise stores need to pay to use the headquarters' trademark and enjoy the goodwill. This is a continuing charge. As long as the franchise store continues to use the headquarters' trademark, it must pay regularly. Payment terms may be annual, quarterly or monthly. As for the deposit, it is the fee charged by the headquarters to ensure that the franchisee will actually fulfill the contract and pay the payment on time. Among them, because the royalties are ongoing charges, some franchise headquarters will require the franchisee to issue a check for the full amount of the royalties within the contract period when signing the contract. For example, if the contract period is five years, the royalties will be paid annually. Some headquarters require franchisees to write five checks at once and pay the five-year royalties to the headquarters. Later, there was a case where a franchisee of a certain system had opened a store for two years and closed down due to poor business. However, as early as the signing of the contract, a check for five years of royalties had been issued and handed over to the headquarters. Logically speaking, since the store has been closed in the next three years and no longer uses the trademark and goodwill of the headquarters, there is no need to pay royalties. However, the headquarters still sends the collected checks to the bank to withdraw money, causing the franchisee not only to If you lose two years of business, you still have to pay the amount of the checks that have been issued! Therefore, if the franchisee is required by the headquarters to issue a check for all the royalties during the contract period, he must remember to add a little note to the contract. When a franchise store closes the store and no longer opens the store, the headquarters must return the unexpired royalties to protect its own rights and interests.

Third, the price issue of headquarters supply. In a general franchise contract, the headquarters will require the franchisee to purchase goods from the headquarters and not to purchase goods privately. This is often the point of greatest dispute between the headquarters and franchise stores. Because franchise stores often think that the prices supplied by the headquarters are on the high side, they purchase products from abroad on their own. However, based on the consistency of the quality of the chain system, the headquarters had to require franchise stores to purchase from the headquarters uniformly, so disputes arose. A more reasonable approach is that when signing the contract, the franchisee should request in advance that the price of goods supplied by the headquarters should not be higher than the market price, or what percentage higher than the market price is acceptable, so as to avoid disputes over price issues between the two parties later. endlessly.

Fourth, the issue of business district security. Usually, in order to ensure the operating interests of the franchise stores, the franchise headquarters will have a business district guarantee, that is, no second branch will be opened within a certain business district. Therefore, franchisees must be very clear about the scope of the guaranteed business district. However, a common situation is that when the headquarters opens a second store not far away from the guaranteed business district, it affects the business of the original franchise store and triggers protests. In fact, if the headquarters is located outside the guaranteed business district, the franchise stores have no right to protest. However, it is worth mentioning that when some chain systems have increased in number of franchise stores or have reached saturation, it is difficult to open new franchise stores under the protection of the business district, so they resort to tricks to develop second brands. This means using another new brand name, but the business content is exactly the same as the original brand, so that you are not subject to the business district protection restrictions of the original brand. For example, there was a real estate agency chain system that was like this. In the end, it would of course lead to a group of franchise stores fighting.

Therefore, in order to protect their own rights and interests, franchisees should state when signing a contract that the headquarters shall not develop a second brand with exactly the same business content.

Fifth, non-competition clauses. The so-called non-competition is a regulation that the headquarters requires franchisees not to engage in the same industry as the original franchise store during the duration of the contract or within a certain period of time after the end of the contract in order to protect the business technology and intellectual property from being leaked due to the opening of franchises. This regulation is intended to protect the intellectual property rights of the headquarters and is understandable. The Fair Trade Commission also believes that this is not illegal. But how long should a non-competition period be? If it is too long, it may affect the franchisee's future work rights. In this regard, a certain chain system's non-compete clause was stipulated to be three years, and the franchise store sued the Fair Trading Commission. The Fair Trade Commission believed that the non-compete clause was reasonable, but did it think that three years was too long? Later, the headquarters also wisely changed the three years to one year. Therefore, franchisees must think carefully when signing a contract to avoid affecting their future livelihood.

Sixth, the issue of management regulations. A typical franchise contract contains as few as ten or twenty clauses, and as many as seventy, eighty or hundreds of clauses. However, there is usually a stipulation that "matters not covered in this contract shall be handled in accordance with the headquarters management regulations." If a franchisee In such a situation, it is best to ask the headquarters to attach the management regulations to the back of the contract as an attachment to the contract. Because the management regulations are formulated by the headquarters, the headquarters can incorporate all matters not specified in the contract into its management regulations, modify them at any time, and do whatever it wants. At that time, the franchisees will have to be at the mercy of the headquarters.

Seventh, regarding penalties for breach of contract. Since the franchise contract is drawn up by the headquarters, it will be more beneficial to the headquarters. In terms of penalties for breach of contract, usually only the part for the franchisee is listed, and there is no mention of the part where the headquarters violates the contract. Franchisees should be able to put forward relative requirements and clearly define the penalties for breach of contract by the headquarters, especially in terms of services and logistical support that the headquarters should provide, and the headquarters should be required to fulfill them.

Eighth, regarding the settlement of disputes. A general franchise contract will specify the court of jurisdiction, and usually the local court where the headquarters is located is the court of jurisdiction. This is to make it easier for headquarters personnel to travel to nearby courts if necessary in the future. It is worth mentioning that a certain franchise headquarters once stipulated in the contract that franchisees must first undergo mediation by the mediation committee of the headquarters before filing a lawsuit in court. When encountering this situation, you should first understand who are the members of the mediation committee? If they are all employees from the headquarters, then the result of the mediation will of course favor the headquarters and be detrimental to the franchisees. Due to the contract, franchisees cannot ignore the mediation committee and directly go to court. Therefore, the author recommends that franchisees should request to delete when encountering similar terms.

Ninth, handling of contract termination. When the contract is terminated, the most important thing for the franchisee is to get back the deposit. At this time, the headquarters will check whether the franchisee has violated the contract or owed money. At the same time, the headquarters may require the franchisee to remove the signboard by himself. If everything goes well and there is no money owed, the headquarters will refund the deposit. But when a dispute arises, whether to dismantle the signboard often becomes the focus of the struggle between the two parties. Some headquarters will even hire workers to dismantle the signboards themselves. If a franchisee encounters this situation, it will depend on who originally funded the signboard. If it is funded by the franchisee, then the ownership of the signboard "object" should belong to the franchisee. Although the headquarters has ownership of the trademark, it cannot dismantle it without authorization. If you really want to demolish it, you must enforce it through the court. If the headquarters demolishes it on its own, it will be a crime of damage.

Tenth, this is the last point that should be noted, that is, after the contract is signed, both parties must each hold one copy. Once upon a time, after a certain supermarket chain system signed a contract with a franchisee, the headquarters kept two contracts but did not leave one contract for the franchisee. It was later sued to the Fair Trade Commission for correction. Therefore, franchisees must remember to keep a copy for themselves in order to clearly understand the contents of the contract and ensure their own rights and interests.

Of course, the most important thing is to read the contents of the contract clearly before signing, and understand the contents one by one. If there is anything unclear or unclear, you should ask the headquarters staff for clarification. Because only by carefully understanding the contract before signing the contract can future disputes be reduced.