1. The first article is an agreement regarding the first installment of royalties.
The first franchise royalties are further specifically divided into standard fees, discounted fees for additional restaurants opened by the licensee, extension fees, ancillary store fees, increased fees for the opening of another new store by the old licensee and the new licensee, and transfer fees.
2. The second article is about the royalties to be paid periodically during the contract.
The royalties are generally set as a percentage of sales.
3. The third article is about the franchisor grants certain rights to the licensee. Such as the right to use the franchisor's management system and operating manuals, the right to use the franchisor's management system to improve the technical and operational information, the franchisor's brand for a limited number of other restaurant-related use.
4. Article 4 is an agreement that the franchisor will provide certain support (e.g., training, counseling, assistance and guidance) to the licensee.
5. Article 5 agrees on various obligations of the licensee. ***15 paragraphs, each paragraph is as follows:
Paragraph 1 of the agreement on the lease of business premises. The business premises can either be leased by the franchisor to the lessor and then sublet to the licensee, or leased by the licensee directly from the lessor. If the former way, the licensee for the use of the business premises only with the franchisor, and the landlord has nothing to do with the rights and obligations, in the case of strict performance of the sublease contract by the licensee, if the landlord and the franchisor of any disputes arising out of the lease contract resulting in losses suffered by the licensee, the licensee can claim compensation from the franchisor; and if the latter way, the licensee for the use of the business premises In the latter case, the licensee only has rights and obligations with the landlord, and if the licensee breaches the lease contract and the landlord sues the franchisor for damages involving the franchisor's brand name, the franchisor may claim compensation from the licensee accordingly.
Section 2 stipulates that the licensee's business activities shall always comply with the provisions of laws and regulations, and shall carry out all necessary formalities and bear the costs; comply with the specifications, standards and steps required and recommended by the operation manual, and make timely adjustments and modifications with the update and improvement of the operation manual, and comply with the franchisor's quality control standards; and shall not disclose or allow others to copy the contents of the operation manual.
Section 3 stipulates that the licensee is responsible for all taxes and fees arising from the operation activities, as well as taking out some insurance programs as required by the franchisor.
Paragraph 4 stipulates that the licensee shall not engage, directly or indirectly, in any other activity of the same or similar nature during the period of the contractual relationship, as well as the amount of compensation to be paid in the event of violation of this provision.
Paragraph 5 stipulates the manner of payment of periodic royalties.
Section 6 stipulates that the licensee shall report sales to the franchisor at agreed times and record sales and operations in the licensee's system in the prescribed manner.
Section 7 stipulates that the franchisor has the right, without prior notice, to visit the licensee's premises to inspect the licensee's operations and to inspect and audit copies of the licensee's records.
Section 8 provides for punitive measures against under-reporting of sales by the licensee.
Section 9 provides for the payment of advertising fees. Advertising costs are not a simple issue in franchising. Neither the franchisor nor the licensee is willing to take the risk of investing in advertising. If the franchisor alone to bear the advertising costs, the licensee is a large number, whether each licensee can provide quality and quantity of services without affecting the advertisement is difficult to say, and the amount of advertising costs is very large, so the franchisor is bound to be difficult to bear alone; and if the licensee to bear the advertising costs, publicizing the franchisor's brand, pay for their own investment, whether it can play a promotional effect, to obtain a return is still It is difficult to say whether the investment in advertising will be effective in promoting the franchisor's brand and whether it will yield a return, and sometimes the investment in advertising may even be wasted due to the low value of the franchisor's own brand, so the licensee may also have doubts if it is allowed to bear the cost of the advertisements. One of the two solutions adopted in this contract is for the franchisor and the licensee to agree on the establishment of an advertising fund account, to which the licensee will remit an agreed percentage of weekly sales as advertising expenses, and to which the franchisor will negotiate with advertisers on the basis of the amount of money in the advertising fund account. In this way, both the franchisor and the licensee do not have to prepare a large amount of money in advance for the advertising campaign, and the licensee pays for the advertising in a way that does not require capital and does not bear any risk. If the licensee's business is good, it will pay more for advertising, and vice versa. The problem with this approach, however, is that if the franchisor diverts some or all of the money from the advertising fund account, it indirectly raises the licensee's periodic royalties, which undoubtedly infringes on the licensee's interests.