Franchise Development

Franchise Development

Direct franchising may be difficult in practice. The necessary backup and assistance may not be easy to provide where the franchisee is in another country. There may be difficulties of monitoring. The franchisors may seek to establish a presence or directly or by way of a joint venture within the third country.

As an alternative to a direct presence or joint venture, the franchisor it may grant a master franchise agreement or a master development agreement that obliges the developer to develop of the franchise either by itself or through others.  There will be a corresponding loss of control at the level of the master franchisor for a greater level of control between the master franchisee and the sub-franchisee.

The franchisor may grant a master franchise agreement. The master franchisor is given the right to operate and grant franchises within the territory. It undertakes to appoint franchisees on the basis of the form of franchise agreements stated out in the agreement.  In effect, the master franchise agreement involves the master franchisee literally stepping into the role of the franchisor in a particular territory.


Franchise Development II

Alternatively, the franchisor may grant a master development agreement. The developer does not sub-franchise but is an intermediary in arranging franchise agreements between the franchisor and the franchisees which it sources. It may, but need not necessarily operate outlets itself.

There may be a substantial upfront fee on the grant of a Master Franchise Agreement or Master Development Agreement. The level of fee will depend on the potential in the market, the possibility of success, established sales and the strength of brand awareness within the country and the amount of fees paid by sub-franchisees, if applicable. Generally, the master franchisee receives a percentage of the ongoing royalties paid by franchisees in the territory controlled by the master franchisee.


Development Obligations

The development agreement or the development element of the franchise agreement may require that the territory in respect of which exclusivity is granted, must be exploited by the opening of units or the grant of sub-franchises over a defined period. Non-exploitation or the failure to meet targets may cause a loss or contraction of the development rights.

Master franchise and development agreements usually provide for target development schedule. It will set the number of outlets to be opened and /or in the relevant future periods. What is required will be a matter for negotiation. There may be provision for review, having regard to the evolution of the market in the product and results achieved.  The schedule may be based on a business plan of the developer/sub-franchisor.

Provision may be made for the consequence of failing to meet the targets. There could be a termination of the agreement and development rights.  There may be a penalty or payment for failure to provide the requisite number of outlets. There may be a loss of exclusivity or of the entire right to exploit or continue exploiting the franchise within the territory concerned. What will apply will be a matter of negotiation in the circumstances.


Master Franchisor’s Rights

Under a master franchise agreement, the franchisee is usually granted the exclusive right to operate franchise businesses and/ or license sub-franchisees within the territories. The master franchise grants the franchisee the right to operate exclusively (or non-exclusively) by itself or by way of licence / sub-franchise agreements, a specified or target number of franchisees within the territory.

The franchisor may retain an overall right to give instructions subject to the terms of the agreement. The franchisee may be obliged to assist the sub-franchisee / licensee in relation to establishing the franchise in much the same way as a standard franchise agreement.

There are likely to be obligations to consult with the master franchisor in relation to establishing new franchise agreements within the area. The franchisee is obliged to submit certain details of the proposed franchise or sub-franchisee to the master franchisor. The master franchisor may be obliged to deal with the request in accordance with criteria on an objective basis


Master Franchise Features I

The features of a master franchise agreement are as follows:

  • the Master franchisee pays an initial franchise fee and acquires the rights to operate the system in the territory;
  • the master franchisee is required to grow and operate the system in the territory autonomously;
  • the rights include the right to grant franchises in the territory;
  • the master franchisee enters into franchise agreements directly with franchisees and payments are received directly from franchisees; and
  • the master Franchisee pays a percentage of the grant fees and ongoing fees it receives from franchisees to the franchisor.

Master Franchise Features II

There is a three-tier structure among the parties involved (franchisor, subfranchisor and sub-franchisee). There is usually a lack of a direct relationship between the franchisor and the sub-franchisee. In a master franchise relationship, each of the parties has obligations and rights vis-à-vis the other. The rights of one party should mirror the obligations of the other.

The sub-franchisor is granted rights, including trademarks and other intellectual property rights which it may sub-licences to sub-franchisees.

The right of the franchisor to receive payment for the rights it has granted the sub-franchisor should, subject to a profit margin, corresponds to the obligation of the sub-franchisor to pay for the rights it has been granted the right to use.


Potential Advantages I

The master franchisee takes on full responsibility for the operation of the franchise system in the territory that has been granted. The master franchisee’s liability is limited in that contractual privity is solely between master franchisee and franchisee.

In exchange for a fee for the grant of the master rights, the developer/ master franchisee is given the rights to recruit franchisees. It is obliged to service, manage and grow the brand in a certain territory. The master franchisee recruits the franchisees.

The key feature is that franchise agreements are between the franchisee and the franchisor. The master franchisee receives a percentage of fees for recruiting franchisees and managing the brand in the territory. The master franchisee is usually also required to operate a franchise in the territory.


Potential Advantages II

The potential advantages of a master / development franchise arrangement are as follows:

  • lower initial grant fee for the master rights makes it more attractive;
  • through careful structuring of the percentage fees payable, the master franchisee can be incentivised to grow the brand in the territory;
  • avoids the problems associated with a two-tier model;
  • Franchisor retains control of the system since all franchise agreements are granted directly by the franchisor;
  • since all franchise agreements are with the franchisor the franchisor can maintain a consistency of service levels across each of the territories;
  • in the event of under-performance by the master franchisee it is easier for the franchisor to take back control of the territory;

Potential Disadvantages

It may be difficult to find a suitable master franchisee who has the experience, and sufficient capital and operating resources to be able to operate the system autonomously in the territory. The investment required to be made by the master franchisee is usually significant, and the upfront grant fees are usually high.

The profitability of the operating franchises must be high in order to support the multi-tiered structure. The multi-tiered structure can mean high franchise fees payable by franchisees resulting in financial stress. Since the master franchisees operate autonomously it leads to a lack of consistency across the different territories and inconsistent service delivery levels;

Compliance is difficult to monitor and enforce. The franchisor loses control over the franchise system. It may be difficult to unwind where the master franchisee fails to operate satisfactorily or comply with the terms of grant;

The disadvantages are as follows:
  • a good franchisee does not necessarily make for a good master franchisee, so great care must be taken in the selection of the master franchisee;
  • unless the role of the master franchisee is properly defined and there is proper training, there can be confusion about the respective responsibilities of the master franchisee and the franchisor;
  • the franchisor needs to be vigilant in monitoring the master franchisee since the master franchisee is in effect acting as the agent of the franchisor in the given territory.

References and Sources

The Encylodaedia of Forms and Precedents Vol 16(4)

Franchising Law and Practice Looseleaf and CD-ROM John Pratt Service
The Law and Regulation of Franchising in the EU Mark Abell 2013
Fundamentals of Franchising 3rd ed EBarkoff 2009 (USA)
UNIDROIT Guide to International Master Franchise Arrangements 2nd ed Edited by: Lena Peters
Principles of European Law Volume 2: Commercial Agency, Franchise and Distribution Contracts Martijn W. Hesselink, Jacobien W. Rutgers, Odavia Bueno Diaz 2006
Franchising Law 2nd ed Martin Mendelsohn 2004
Negotiating an International Master Franchise Agreement Martin Mendelsohn 2002


Sample Master Franchise Agreement

Date:                        20

Parties:

1             ‘The Licensor’: [________] Limited (registered no [________]) whose registered office is at [________].

2             ‘The Licensee’: [________] Limited (registered no [________]) whose registered office is at [________].

Recitals:

(A)         The Licensor has expended substantial time effort and money in the development and implementation of the business of [________] which is operated in accordance with a distinctive system and plan utilising and comprising certain proprietary marks, confidential information, standards, specifications, techniques, identifying schemes and materials, insignia, management methods and standard operational procedures.

(B)         The Licensee desires to obtain the benefit of the knowledge, skill and experience of the Licensor and the right to operate the business system of the Licensor and to grant sub‑licences to other parties to operate the same in the specified territory upon the terms and subject to the conditions set out below.

Operative provisions:


1             Interpretation

1.1          In this Agreement the following expressions shall have the following meanings unless the context otherwise requires:

‘BUSINESS’ means the franchise business of [________] operated and conducted under the Proprietary Marks using the System more particularly described in the Operating Manual as those terms are defined respectively below

‘FRANCHISEES’ means the persons duly authorised by the Licensee in accordance herewith to operate the Business in the Territory

‘OPERATING MANUAL’ means the written specification of the methods, processes, techniques, systems and schemes devised and compiled by the Licensor to be observed and implemented by the Licensee and the Franchisees in operating the Business

‘PROPRIETARY MARKS’ means the patents, trade marks, trade names, logos and registered designs details of which are set out in Schedule [1] hereto and all other patents, trade marks, trade names, logos, designs, symbols, emblems, insignia, fascia, slogans, copyrights, know how, information, drawings, plans and other identifying materials whether or not registered or capable of registration and all other proprietary rights whatsoever owned by or available to the Licensor adopted or designated now or at any time hereafter by the Licensor for use in connection with the System

‘SYSTEM’ means the distinctive business format and method developed and implemented by the Licensor in connection with the operation of the Business utilising and comprising the Proprietary Marks, and certain standard operational procedures, plans, directions, specifications, methods, management and advertising techniques and identification schemes, part of which are contained in the Operating Manual

‘FRANCHISE AGREEMENT’ means the form of agreement approved by the Licensor for the appointment of Franchisees

‘TERRITORY’ means the territory more particularly described in Schedule [2]

‘SERVICES’ means the consultative advisory and other services to be rendered by the Licensee to the Franchisees more particularly described in Schedule [3]

‘PRODUCTS’ means the products identified by the Proprietary Marks sold or provided in the course of the Business

‘TERM’ means the [________] year period commencing on the date hereof and expiring [________]

‘PAYMENT DATE’ means the [________] day of each calendar month during the Term

‘CURRENCY’ means [  ] [   ]

 ‘PERFORMANCE SCHEDULE’ means in respect of each year during the Term the minimum performance criteria in terms of number of franchise outlets opened and gross fees receivable specified in Schedule [4].


2             Appointment and grant

2.1          The Licensor hereby grants to the Licensee the [sole and exclusive] right and licence during the Term itself to operate and to grant sub‑licences to the Franchisees to operate the Business in the Territory under the Proprietary Marks in accordance with the System subject to the terms and conditions set out below.


3             Territory

3.1          The right and licence granted to the Licensee hereunder shall extend only to the Territory and the Licensee agrees that it will not make any use nor will permit or authorise any use nor grant any sub‑licence in respect of the System or the Proprietary Marks nor sell or permit the sale of the Products outside the Territory nor will it knowingly offer or provide any information or assistance concerning the System or the Proprietary Marks or sell the Products to any person, firm or undertaking who intends or may seek to use or resell them outside the Territory.

3.2          The Licensor will not subject as provided herein itself operate nor make use of nor license any person other than the Licensee to operate or grant sub‑licences in respect of the System under the Proprietary Marks in the Territory.


4             Obligations of licensor

4.1          In order to facilitate commencement and development of the Business in the Territory by the Licensee the Licensor agrees as follows:

4.1.1       to provide to the Licensee at the expense of the Licensee assistance in connection with the development of the Business in the Territory and training in the standards, procedures, techniques and methods comprising the System and to make available to the Licensee two competent members of its executive staff for [________] periods of [________] each during each year of the Term for training and advice purposes;

4.1.2       to deliver to the Licensee sufficient copies of the Operating Manual and any other training materials deemed appropriate by the Licensor for loan to the Franchisees;

4.1.3       to permit the Licensee to operate and promote and grant sub‑licences to the Licensees to operate and promote the Business in the Territory under the trade name [________] in accordance with the terms of this Agreement;

4.1.4       to make available to the Licensee at the cost of the Licensee with reasonable promptness members of the Licensor’s staff competent to provide any requisite on‑site assistance and advice in connection with the System or recommend to the Licensee such independent experts as may appear necessary;

4.1.5       not unreasonably to withhold approval of any of the Franchisees recommended by the Licensee as suitable to enter into the Franchise Agreement and to operate the Business in the Territory.


5             Obligations of licensee

5.1          The Licensee agrees as follows:

5.1.1       upon the execution of this Agreement to permit the Franchisor to register the particulars of this agreement at the Trade Marks Registry in respect of each of the trade marks of the Licensor set out in Schedule [1] and to execute such other agreements in respect of such trade marks during the Term as the Licensor shall require;

5.1.2       to operate the Business and procure that all the Franchisees operate the Business strictly in accordance with the provisions of the Operating Manual and conform in all respects and at all times with the System as modified from time to time and not at any time to use or permit the use of any additional trade name or symbol or do or permit to be done anything which is additional to or not in accordance with the System without the previous consent in writing of the Licensor;

5.1.3       to engage all staff and other persons and acquire premises and all other facilities necessary for the successful operation and optimum development of the Business by the Licensee in the Territory;

5.1.4       to ensure that all such staff and replacements for staff who are required under the terms of this Agreement to undergo training in the System, are trained in the System and any improvements thereto;

5.1.5       to use and procure that the Franchisees shall use only such letter headings, invoices, signs, display materials, promotional literature, equipment and other items in connection with the Business as shall be approved in writing by the Licensor;

5.1.6       diligently and with the utmost good faith to carry on the Business and to use best endeavours to promote and increase the Business and the System in the Territory and co‑operate with the Licensor and the Franchisees in this regard;

5.1.7       to procure the greatest number of outlets for the Business and the largest volume of turnover for the Business in the Territory as may be consistent with the maintenance of the high standards of service required by the Licensor;

5.1.8       continuously and efficiently to make available to the Franchisees the Services;

5.1.9       to appoint the Franchisees only subject to the terms of the Franchise Agreement and not on any other terms;

5.1.10     diligently and at its own cost to procure compliance by each of the Franchisees with the terms of the Franchise Agreement;

5.1.11     to promote and preserve the goodwill and reputation associated with the Proprietary Marks;

5.1.12     to comply with all statutes, byelaws, regulations and requirements of any government or other competent authority relating to and apply for any governmental, fiscal or other consents necessary for the conduct of the Business in the Territory;

5.1.13     to sell and permit the sale by the Franchisees only of such products or services as may be described from time to time in the Operating Manual upon the terms and conditions therein set out;

5.1.14     to procure from its key personnel and from each of the Franchisees for the time being and from such other persons as the Licensor shall require, an undertaking in a form specified by the Licensor not to disclose to any third party any confidential information or knowledge concerning the Business, the Proprietary Marks or the System and at its own expense to take such steps as the Licensor may direct in order to enforce or restrain any breach of the terms of any such undertaking.


6             Restrictions on licensee

6.1          During the continuance of this Agreement, the Licensee agrees as follows:

6.1.1       not to permit any of the Franchisees to commence operating the Business in the Territory until the persons responsible for its operation have undergone a proper course of training to the satisfaction of the Licensor and have been approved as competent by the Licensor nor itself to employ any such person who has not undergone such training nor being so approved;

6.1.2       not to permit or suffer any person to act or assist in the operation of the Business until such person has signed a non‑competition and confidentiality undertaking in the form from time to time specified by the Licensor;

6.1.3       not to sell, assign, transfer, charge or otherwise deal with the Business, the System, or the Proprietary Marks nor any part thereof without the prior written consent of the Licensor save in accordance with this Agreement;

6.1.4       not to cause or permit to subsist any circumstance which may constitute a breach of any insurance policy maintained to this Agreement;

6.1.5       not to do or omit to do or permit or suffer any act or thing which may in the sole opinion of the Licensor bring the Business or the Proprietary Marks into disrepute or which may in the sole opinion of the Licensor damage or conflict with the interests of the Business or the Licensor;

6.1.6       not without the Licensor’s prior written consent in any capacity whatsoever be directly or indirectly engaged in any business or undertaking other than the Business;

6.1.7       not to use or permit or suffer the use by any of the Franchisees of any of the Proprietary Marks as part of its or their corporate name;

6.1.8       not to appoint any of the Franchisees without the prior written consent of the Licensor;

6.1.9       not to vary or amend the substantive terms of the Franchise Agreement without the prior written consent of the Licensor;

6.1.10     not without the prior written consent of the Licensor to permit or suffer any dealing with the Products save by the Franchisees in accordance with the Franchise Agreement;

6.1.11     not to permit or suffer any dealing with the Products without having submitted samples thereof to the Licensor together with all packaging and advertising materials associated therewith and obtained the prior written consent of the Licensor thereto; and

6.1.12     not to cause or permit any other person firm or undertaking to conduct any business in or to trade from any premises used by the Licensee for the purposes of this Agreement.


7             Non‑competition obligation

7.1          The Licensee covenants during the Term and for a period of one year after the expiration or termination for any reason of this Agreement whether itself or together with any other person firm or company in any capacity whatsoever save as authorised hereunder directly or indirectly:

7.1.1       not to be engaged, or interested, or concerned in any business which is in the sole opinion of the Licensor similar to or competitive or in conflict with the Business; and

7.1.2       not to employ or seek to employ any person who is at that time or has at any time in the previous two years been employed by the Licensor, the Licensee or any other Franchisees or in any business carried on under the Proprietary Marks using the System or otherwise directly or indirectly induce or seek to induce any such person to leave his or her employment; and

7.1.3       not to solicit customers or former customers of the Business nor divert or seek to divert any custom from the Licensee or the Licensor or any of the Franchisees.


8             Confidentiality obligation

8.1          The Licensee hereby acknowledges that the Operating Manual and all other information and knowledge relating to the System is of a strictly confidential nature and accordingly, the Licensee covenants that it will not and it will procure that no other person shall at any time without the prior written consent of the Licensor whether before or after termination of this Agreement divulge or use whether directly or indirectly for its own benefit or that of any other person, firm or company any of such information or knowledge relating to the System which may be communicated to or otherwise acquired by the Licensee its directors, agents or employees.


9             Advertising

9.1          The Licensee shall devise and implement local regional and national promotional activities in the Territory during each year of the Term and will:

9.1.1       procure timely payment by each of the Franchisees of the contributions to the advertising fund required by the Operating Manual and Franchise Agreement;

9.1.2       establish a separate bank account for the advertising fund and pay all advertising contributions from the Franchisees into such fund;

9.1.3       use the advertising fund solely for the purposes of defraying the costs of devising and implementing the said promotional activities which costs shall include the salaries and expenses of employees principally engaged in the promotional activities, fees and commissions of designers, copywriters, advertising agents, public relations consultants and all other advertising media costs and expenses;

9.1.4       keep books of accounts and records of all monies received and expended by the Licensee in carrying out the promotional activities and arrange for an annual audit thereof by a qualified Chartered Accountant at least once in each year of the Term and to submit such accounts once duly approved to the Licensor and to each of the Franchisees in the Territory.


10           Insurance

10.1        The Licensee shall at its own expense arrange and maintain:

10.1.1     fully comprehensive product liability and employers liability as may be required by the Licensor with an insurance company acceptable to the Licensor in the Territory and will procure that the Licensor is also fully covered and indemnified by such insurance;

10.1.2     such other comprehensive insurance covering all usual public and private risks associated with the carrying on of a business in the Territory which insurance shall cover and indemnify the Licensor and the Licensee for and against any and all claims by the Franchisees or other third parties within the Territory arising from the operation of the Business.

10.2        The Licensee shall pay all premiums due in respect of any policy of insurance required to be maintained hereunder and procure that the insurer shall notify the Licensor in event of any failure by the Licensee to pay any premiums so due.

10.3        The Licensee shall procure that the insurer shall certify in writing to the Licensor that the Licensor is covered and indemnified against the risks specified by the Licensor and required to be insured hereunder and shall supply the Licensor with a copy of each policy of insurance effected by the Licensee hereunder.


11           Trade marks

11.1        The Licensor warrants that it is entitled to license the Proprietary Marks to the Licensee and that subject to registration pursuant to the Trade Marks Act 1994 of the trade mark licence hereby granted the use of the Proprietary Marks by the Licensee in the Territory will not constitute an infringement of the rights of any third party and will fully and effectively indemnify the Licensee for and against all proceedings, loss, damage, costs, claims and expenses arising out of any such infringement.

11.2        The Licensee shall render to the Licensor all reasonable assistance to enable the Licensor to obtain registration in any part of the world of any of the Proprietary Marks. In no circumstances will the Licensee apply for registration as proprietor of any of the Proprietary Marks in any part of the world but if at the time the Licensor desires to apply for registration and has so applied, the Licensee is deemed in law also to be the proprietor of any trade mark or if for any other reason the Licensor shall so request, the Licensee shall at the Licensor’s expense make in its own name or jointly with the Licensor and proceed with such application as the Licensor may direct and do all such acts and things and execute all such documents necessary for obtaining such registration and thereupon the Licensee shall assign such registration and all other rights in such trade marks to the Licensor.

11.3        The Licensee acknowledges that the goodwill and all other rights in and associated with the Proprietary Marks in the Territory and elsewhere vest absolutely in the Licensor and that it is the intention of the parties that all such rights will at all times hereafter and for all purposes remain vested in the Licensor and in the event that any such rights at any time accrue to the Licensee by operation of law or howsoever otherwise the Licensee will at its own expense forthwith on demand do all such acts and things and execute all such documents as the Licensor shall deem necessary to vest such rights absolutely in the Licensor.

11.4        In the event that a registration is obtained in the Territory for any of the Proprietary Marks subsequent to the date hereof, the Licensee shall subject to registration of particulars of this agreement at the Trade Marks Registry in respect of such other trade marks be entitled to such like rights under such registration as are granted by this Agreement in respect of the other registered trademarks comprised at the date hereof in the Proprietary Marks and hereby authorises the Licensor to register such particulars in respect thereof.

11.5        The Licensee will notify the Licensor forthwith of any and all circumstances coming to the attention of the Licensee, its directors, agents and employees which may constitute an infringement of any of the Proprietary Marks or any suspected passing off in connection therewith by any unauthorised person and shall take such reasonable action as the Licensor may direct at the expense of the Licensor with a view to restraining or preventing such infringement or passing off.

11.6        The Licensee shall take such action in relation to the use of any of the Proprietary Marks in the Business as the Licensor may from time to time direct in order to make clear that the Proprietary Marks are the subject of patent, copyright or trade mark protection and belong to the Licensor.


12           Improvements and innovations

12.1        The Licensor agrees to make any improvements, additions or modifications of or to the System available to the Licensee without delay who shall when required by the Licensor introduce any such improvement, addition or modification into the Business at the time and in the manner specified by the Licensor in writing and the System shall thereupon be deemed to have been so varied.

12.2        The Licensee will notify the Licensor of any improvements, additions or modifications of or to the System which may assist in the operation of the Business and the Licensor may introduce such improvements, additions or modifications without any obligation to make any payment therefor.

12.3        The Licensee will not itself introduce nor permit the introduction by any of the Franchisees of any improvement, addition or modification of or to the System into the Business without the prior written consent of the Licensor so to do.


13           Operating manual

13.1        The Licensor will provide the Licensee with full written details of any alterations or variations to the form of the Operating Manual to enable the Licensee promptly to inform the Franchisees thereof.

13.2        The Licensor shall keep at its head office a definitive copy of the Operating Manual as revised and modified from time to time which in the event of any dispute as to the contents or import thereof shall be the authentic text.

13.3        The Licensee shall and shall procure that each of the Franchisees shall conduct the Business strictly in accordance with the Operating Manual the terms of which shall be deemed incorporated into and shall form part of the Franchise Agreement and this Agreement as if set forth fully therein. In the event of any conflict between the terms of the Franchise Agreement and this Agreement and the terms of the Operating Manual the former shall prevail.

13.4        The Operating Manual shall at all times remain the sole and exclusive property of the Licensor and the Licensee hereby acknowledges that the copyright therein vests in the Licensor and will not take and will procure that no other person will take any copies thereof without the prior written consent of the Licensor.


14           Fees and payment

14.1        In consideration of the grant of the right and licence to operate the System and develop the Business in the Territory, the Licensee shall pay to the Licensor or such person as the Licensor may direct in respect of each calendar month during the Term a fee equal to [________] per cent of the gross franchise fees of the Licensee during each such calendar month which fee shall be paid in the Currency without deduction or set‑off to the Licensor on or before each Payment Date together with any value added tax thereon at the prevailing rate.

14.2        For the purpose of this Agreement the expression ‘gross franchise fees’ shall mean all franchise fees including any deposits initial fees and renewal fees receivable by the Licensee in each calendar month during the Term and any sums invoiced by the Licensee to the Franchisees in any such calendar month whether or not paid and the value of any products or services sold or rendered by the Licensee to the Franchisees but not invoiced in any such calendar month and any other commissions, discounts, fees or payments whatsoever receivable by the Licensee in connection with the Business or the supply of the Services in any such calendar month but shall not include any value added tax or any similar direct sales tax paid to the Licensee in respect of such fees.

14.3        In the event that any sums due to the Licensor are not paid by the Licensee on the due date, such sums shall bear interest from the day to day at an annual rate of 4 per cent above the base rate from time to time of the [________] Bank PLC subject to a minimum of [    ] per cent per annum as well after as before judgment in respect thereof.


15           Accounts and records

15.1        The Licensee shall:

15.1.1     maintain an accurate account and record of all gross franchise fees in each month up to the close of business on the last working day of each month and shall prepare in a form approved by the Licensor a monthly financial statement thereof and shall remit the same to the Licensor on or before each Payment Date;

15.1.2     maintain in a form approved by the Licensor full and accurate books of account and shall keep detailed management and accounting records including all supporting vouchers, invoices and delivery notes and shall permit the Licensor or its duly authorised agent during business hours to inspect any such accounts and records and to take copies thereof at the expense of the Licensor;

15.1.3     duly to prepare and promptly furnish to the Licensor all such other accounting and management information as the Licensor may from time to time require in the form specified by the Licensor;

15.1.4     at the Licensee’s expense in each accounting year during the Term have all such accounts and records audited by a qualified Chartered Accountant and to supply a full set of such audited accounts which shall include a balance sheet and profit and loss account to the Licensor within three months after the close of each such accounting year;

15.1.5     procure that the accounting reference date of the Licensee shall be [________];

15.1.6     preserve all such accounts and records for not less than three years notwithstanding the expiry or termination of this Agreement;

15.1.7     permit auditors nominated by the Licensor at the expense of the Licensee to undertake such audits as the Licensor may consider on reasonable notice during normal business hours.


16           Termination

16.1        The Licensor may terminate this Agreement forthwith by giving notice in writing to the Licensee in any of the following events:

16.1.1     if the Licensee fails to comply with or achieve the criteria set out in the Performance Schedule;

16.1.2     if the Licensee shall at any time fail to pay any amounts due and payable to the Licensor hereunder within ten days of a notice in writing requesting such payment;

16.1.3     if the Licensee shall fail to submit to the Licensor in a timely manner any of the accounting or management information required to be so submitted;

16.1.4     if the Licensee shall fail to operate or procure the operation of the Business in accordance with the System;

16.1.5     if the Licensee shall in the opinion of the Licensor misuse or permit or suffer the misuse or in any way impair the goodwill associated with any of the Proprietary Marks or takes any action to contest the validity or ownership thereof;

16.1.6     if the Licensee shall purport to effect any assignment of any of the rights or licences herein granted other than in accordance with the terms hereof;

16.1.7     if the Licensee fails to obtain any prior approval or consent expressly required by this Agreement;

16.1.8     if the Licensee discloses or permits or suffers the disclosure of any part of the Operating Manual or other confidential information contrary to the terms hereof;

16.1.9     if the Licensee or any officer, director or employee of the Licensee gives to the Licensor any false or misleading information or makes any misrepresentation in connection with this Agreement or the Business;

16.1.10   if any material change shall occur in the management, ownership or control of the Licensee;

16.1.11   if the Licensee otherwise neglects or fails to perform or observe any of the provisions of this Agreement or commits any breach of its obligations hereunder, which breach if remediable is not remedied to the satisfaction of the Licensor within thirty days of a notice in writing to the Licensee requesting its remedy, provided that the Licensor shall not be obliged to give such notice in the case of a persistent breach which shall be one which has occurred more than twice in any twelve month period.

16.2        This Agreement shall automatically terminate without notice being given to the Licensee in any of the following events:

16.2.1     if the Licensee shall become insolvent by reason of its inability to pay its debts as they fall due or shall enter into liquidation whether voluntarily or compulsorily other than for the purposes of a reconstruction or amalgamation or shall make any arrangement or composition with its creditors or shall have a receiver appointed of all or any part of its assets or takes or suffers any similar action in consequence of a debt;

16.2.2     if any party takes or threatens any action including but without limitation the commencement of legal proceedings to enforce or foreclose any lien or mortgage over or in respect of any property of the Licensee.


17           Consequences of termination

17.1        Upon the termination or expiration of this Agreement for any reason, the Licensee shall:

17.1.1     immediately pay to the Licensor the full amount of all monies then or thereafter due together with any interest thereon up until the date of payment;

17.1.2     immediately cease to operate the Business and to use the System or authorise any other person so to do and shall not thereafter hold itself out in any way as a Licensee of the Licensor and will refrain from any action that would or may indicate any relationship between it and the Licensor;

17.1.3     immediately cease to use in any way whatsoever any and all of the Proprietary Marks and any other trade names, logos, devices, insignia, procedures or methods which are or may be associated with the Proprietary Marks or the System;

17.1.4     return to the Licensor or otherwise dispose of or destroy as the Licensor shall direct all signs, advertising materials, stationery, invoices, forms, specifications, designs, records, data, samples, models, programmes and drawings pertaining to or concerning the Business or the System or bearing any of the Proprietary Marks;

17.1.5     remove or permanently cover all signs or advertisements at its premises identifiable in any way with the Licensor and in the event of failure promptly so to do, to permit the authorised agents of the Licensor to enter on the premises for such purpose;

17.1.6     return to the Licensor or transmit as the Licensor shall direct all copies of the Operating Manual in its possession;

17.1.7     do all such acts and things and execute all such documents as the Licensor shall require, in particular but without limitation such notification or cessation of use of the Proprietary Marks as is necessary for the purpose for recording the same at the Trade Marks Registry;

17.1.8     procure the transfer of all telephone lines and numbers used by the Licensee to such person as the Licensor may direct;

17.1.9     otherwise perform its obligations and observe the covenants set out in clause [7 and 8] hereof.

17.2        The expiration or termination of this Agreement shall be without prejudice to the accrued rights of the parties and any provision hereof which relates to or governs the acts of the parties hereto subsequent to such expiry or termination hereof shall remain in full force and effect and shall be enforceable notwithstanding such expiry or termination.


18           Manufacturing licence

18.1        It is hereby acknowledged by the Licensee that the Licensor may at any time without thereby incurring any liability to the Licensee or the Franchisees grant to any person firm or company whether or not situate in the Territory a licence to manufacture any or all of the Products and for that purpose appoint any such person firm or company a registered user of any of the Proprietary Marks.


19           Direct dealing

19.1        In the event of the expiry or sooner termination of this Agreement for any reason the Licensee shall at the request of the Licensor do all such acts and things and execute such deeds and documents as the Licensor shall require to effect the assignment of the Franchise Agreements with the Franchisees in the Territory to the Licensor or such other person as the Licensor shall specify and in those circumstances the Licensor shall have the right to deal directly with the Franchisees and to receive all monies paid or payable by the Franchisees to the Licensee after the date of such expiry or termination without incurring any liability to the Licensee whatsoever.


20           Indemnity

20.1        The Licensee hereby agrees fully and effectively to indemnify the Licensor on demand for and against all proceedings, costs, claims, damages and expenses of whatsoever nature howsoever suffered or incurred by the Licensor arising out of or by reason of:

20.1.1     any act or omission of the Licensee in operating or permitting others to operate the Business and supplying the Services in the Territory;

20.1.2     any act or omission of any of the Franchisees in operating the Business in the Territory;

20.1.3     any breach of or non‑compliance with any of the terms of this Agreement by the Licensee;

20.1.4     any failure to enforce the terms of the Franchise Agreement with any of the Franchisees.


21           No partnership or agency

21.1        The Licensee shall not pledge the credit of the Licensor nor represent itself as being the Licensor nor an agent, partner, or employee of the Licensor and shall not hold itself out as such nor as having any power or authority to incur any obligation of any nature express or implied on behalf of the Licensor and nothing in this Agreement shall operate so to constitute the Licensee an agent, partner, or employee of the Licensor.


22           No warranties without authority

22.1        The Licensee shall not make or issue any statement, representation or claim and shall give no warranty to any person in respect of the Business, the Products or the System save such as are specifically authorised by the Licensor in writing.


23           Assignment by licensor

23.1        This Agreement and all the rights of the Licensor hereunder may be assigned, transferred or otherwise dealt with by the Licensor and shall inure to the benefit of the successors and assigns of the Licensor.


24           Reservation of rights

24.1        All rights and licences not specifically and expressly granted to and conferred upon the Licensee by this Agreement are for all purposes reserved to the Licensor.


Boilerplate Clauses and Schedules

25           Severability

25.1        Each of the restrictions and provisions contained in this Agreement and in each clause and sub‑clause hereof shall be construed as independent of every other such restriction and provision to the effect that if any provision of this Agreement or the application of any provision to any person, firm or company or to any circumstances shall be determined to be invalid and unenforceable then, save as provided in clause [25.2] below, such determination shall not affect any other provision of the Agreement or the application of such provision to any person, firm, company or circumstance all of which other provisions shall remain in full force and effect.

25.2        In the event that any provision of this Agreement shall be held to be invalid or unenforceable by a court of law or other competent authority in a way which in the sole opinion of the Licensor materially adversely affects the interest of the Licensor, the Licensor may without liability terminate this Agreement by notice in writing to the Licensee to that effect and in such circumstances the provisions of clause [17] above will apply.

26           Force majeure

26.1        Neither of the parties to this Agreement shall be responsible to the other party for any delay in performance or non‑performance due to any causes beyond the reasonable control of the parties hereto, but the affected party shall promptly upon the occurrence of any such cause so inform the other party in writing, stating that such cause has delayed or prevented its performance hereunder and thereafter such party shall take all action within its power to comply with the terms of this

Agreement as fully and promptly as possible.

27           Waiver

27.1        No failure of the Licensor to exercise any power given to it hereunder or to insist upon strict compliance by the Licensee with any obligation or condition hereof and no custom or practice of the parties at variance with the terms hereof shall constitute a waiver of any of the Licensor’s rights hereunder.

27.2        No waiver by the Licensor of any particular default by the Licensee shall affect or impair the Licensor’s rights in respect of any subsequent default of any kind by the Licensee nor shall any delay or omission of the Licensor to exercise any rights arising from any default affect or impair the Licensor’s rights in respect of the said default or any other default of the Licensee hereunder. Subsequent acceptance by the Licensor of any payments by the Licensee shall not be deemed a waiver of any preceding breach by the Licensee of any of the terms covenants or conditions of this Agreement.

28           Notices

28.1        Any notice required to be given hereunder by any party hereto shall be in writing sent by prepaid recorded delivery or registered post or by telex and shall be deemed effective if sent by post at the expiration of seventy‑two hours after the same was posted whether or not received or if by telex, twenty‑four hours after dispatch to the correct telex number of the addressee. Each of the parties hereto shall notify the others of any change of address within forty‑eight hours of such change.

29           Entire agreement

29.1        This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements in connection with the subject matter hereof. No director, employee or agent of the Licensor is authorised to make any representation or warranty not contained in this Agreement and the Licensee acknowledges that it has not relied on any such oral or written representations. No variation or waiver of any of the provisions of this Agreement shall be binding unless in writing and signed by a duly authorised director or employee of the Licensor and the Licensee.

30           Applicable lawM2‑051

30.1        This Agreement and all rights and obligations of the parties hereto shall be governed and construed in accordance with the Law of [      ] and the parties hereby submit to the jurisdiction of the [       ] Courts.

31           Headings

31.1        Any marginal notes and headings contained in this Agreement are for reference purposes only and do not form part of this Agreement and shall not be deemed to alter or affect the meaning of any of the provisions hereof.

SCHEDULE 1

Trade Marks

SCHEDULE 2

Territory

SCHEDULE 3

Services

SCHEDULE 4

Performance Schedule