This sample master franchise agreement is for illustrative purposes only and must not be used by any party seeking to franchise their business without taking the author’s prior advice. By Mark Abell, head of franchising, licensing and multi-channel strategies at the City law firm, Bird & Bird.
Dated [ ] 201[ ]
LES PIEDS D’OR LIMITED – and – SHAKE-A-LEG LIMITED
MASTER FRANCHISE AGREEMENT
THIS AGREEMENT is made the [ ] day of [ ] Two thousand [ ] BETWEEN LES PIEDS D’OR LIMITED whose registered office is situate at [15 Bugle Street, London EC1 2AA] (hereinafter called the “Franchisor”) and SHAKE-A-LEG LIMITED whose registered office is situate at 15 Orchard Road, Singapore (hereinafter called the “Master Franchisee”).
(A) The Franchisor trading as “Tootsies” has established a reputation and demand for high quality mobile unisex foot restoration services (the “Services”) within the United Kingdom.
(B) The Franchisor, through its extensive research and practical business experience has developed secret, substantial and identified know-how which forms a system as described in this Agreement (the “System”) for the profitable operation of the Services, a written record of which is contained in the Franchisor’s operational manual (the “Manual”) and which is the Franchisor’s sole property.
(C) “Know-how” means a package on non patented practical information, resulting from experience and testing by the Franchisor, which is secret, substantial and identified.
(D) “Secret” means that the Know-how, as a body or in the precise configuration and assembly of its components, is not generally known or easily accessible, it is not limited in the narrow sense that the individual component of the Know-how should be totally unknown or unobtainable outside the Franchisor’s business.
(E) “Substantial” means that the Know-how includes information which is of importance for the sale of goods or the provision of services to end users, and in particular for the presentation of goods for sale, the processing of goods in connection with the provision of services, methods of dealing with customers, and administration and financial management; the Know-how is useful for the franchisee by being capable, at the date of conclusion of the agreement, of improving the competitive position of the franchisee, in particular by improving the franchisee’s performance and helping it to enter a new market.
(F) “Identified” means that the Know-how is described in a sufficiently comprehensive manner so as to make it possible to verify that it fulfils the criteria of secrecy and substantially.
(G) The development of the System is by virtue of having acquired knowledge and international experience and skill in electro and hand massaging, oiling, manicuring, tanning and otherwise beautifying tired and aching feet at the clients home or work place and other activities related to the same, including (amongst other things) water and air jetting of every description.
(H) The Franchisor now wishes to further extend the Services on a world-wide basis, and in particular to establish them in Singapore (the “Territory”).
(I) The Franchisor owns in the Territory and other places including France, Italy and Belgium the registered and unregistered Trade and Service Marks listed in Schedule I (collectively known as the “Marks”), used in relation to and in connection with the Services. In addition, the Franchisor owns valuable goodwill in slogans, distinctive motor vehicle markings and other identifying characteristics.
(J) The business of providing the Services in accordance with the System under the Marks is hereinafter referred to as the “Business”.
(K) The success of the Franchisor within the Territory depends amongst other things upon the provision by the Master Franchisee and its Franchisees of a prompt efficient and satisfactory and courteous service to the public using the materials which are the subject matter of the franchise and detailed in Schedule II hereto and the Equipment, which is also detailed in Schedule II hereto, and upon the vigorous cultivation and extension by the Master Franchisee of the market for the Services. The Franchisor is entering into this Agreement upon the Master Franchisee’s assurance that it will be committed to developing the Business within the Territory.
(L) The Master Franchisee has no prior experience of foot restoration services but desires the right to develop the Business within the Territory, including the rights granted in Clause 1 below.
NOW IT IS HEREBY AGREED AS FOLLOWS:-
1. Rights granted
(1) Subject to and in accordance with the terms hereof the Franchisor hereby grants to the Master Franchisee:-
- (a) The exclusive right to carry on the Business within the Territory.
- (b) The right to use in the Business the Marks and other symbols, insignia, distinctive designs and plans or specifications owned or authorised to be used by the Franchisor together with the benefit of the accumulated experience and knowledge relating to provision of the Services.
(2) The Master Franchisee shall not hold itself out as being the agent or partner of the Franchisor, or as being entitled to pledge the credit of the Franchisor, and will identify itself as an independent undertaking in all dealings with third parties and on all stationery, signs and other object bearing the Marks.
This Agreement shall, subject to the provision oftermination below, subsist for a period of ten years commencing on the [ ] day of [ ] 201( ), or immediately upon the Master Franchisee obtaining any relevant consents and/or filing any relevant registrations, whichever is the later, subject to Clause 5(b) below.
3. Franchisor’s initial obligations
In order to assist the Master Franchisee in launching the Business in the Territory, the Franchisor will, in addition to the training to be provided pursuant to Clause 6 hereof, provide to or make available to the Master Franchisee the following:-
(a) Advice in regard to the establishment and efficient operation of the Business and in particular the first Franchise unit to be established within the Territory.
(b) Operational support for a period of [ ] months from the [ ] day of [ ] 201( ), by providing such suitably qualified staff in such numbers and for such periods as the Franchisor shall reasonably consider necessary to assist the efficient launch of the Business in the Territory.
4. The franchisor’s continuing obligations
To assist the Master Franchisee in conducting the Business, the Franchisor will, in addition to the training to be provided pursuant to Clause 7 hereof, provide or make available to the Master Franchisee the following:-
(a) The continual up-date if any alterations and/or improvements in or to the System, to enable the Master Franchisee to keep the Manual up to date. In the event of any dispute, the authentic text of the Manual shall be the copy kept as such by theFranchisor at its head office. The Manual shall at all times remain the property of the Franchisor. TheMaster Franchisee hereby acknowledges that the copyright in the Manual is invested in the Franchisor.
(b) Copies of all other advertising materials suitable for use in the Territory.
(c) At the Master Franchisee’s reasonable written request, advice Know-how and guidance in such areas as management, finance and promotion of the Business and any equipment to be employed in connection therewith.
(d) Two visits per annum (not exceeding 10 days per visit) by such members of the Franchisor’s staff as the Franchisor shall, after consultation with the Master Franchisee, consider appropriate for the purpose of monitoring the standards of the Master Franchisee and any franchisees.
(e) Up to date information regarding all conventions, seminars, franchise meetings organised by the Franchisor or any other Master Franchisees of the Franchisor, and permit or arrange for the Master Franchisee at its own expense to attend such events. No charge will be made by the Franchisor or other Master Franchisees of the Franchisor for attendance at conventions, seminars or meetings.
(f) Not to sell the materials or equipment to third parties in the Territory.
(g) Not itself to exploit the franchise or market the services, materials or equipment in the Territory under a similar formula.
(h) Not grant the right to exploit all or part of the franchise in the Territory to third parties.
5. Master franchisee’s obligations
In order to protect the Marks and maintain the identity and reputation of the franchised network, the Master Franchisee agrees to:-
(a) Ensure that it has adequate finances including working capital to discharge its obligations under this Agreement.
(b) Register this Agreement with any relevant authorities, and obtain any necessary governmental or othercomments as soon as possible, and in any event within 2 months of the date of the execution of this Agreement.
(c) Within three months of the date hereof or of the Master Franchisee obtaining any necessary governmental or other comments, whichever is the later to commence the Business within the Territory through a Franchisee as herein specified.
(d) Check, on a monthly basis, that all Franchisees are fulfilling their duties and obligations as contained in the relevant Franchise Agreement, and take all such reasonable steps as the Franchisor may require, to ensure that such duties and obligations are fulfilled.
(e) Provide sufficient organisation to enable the Franchisees to carry on the Services in the Territory on a 24 hour a day basis, seven days a week, including holiday periods and bank holidays, and carrying out checks as to efficiency, as prescribed from time to time by the Franchisor.
(f) At all times to use the Marks in the Business and to maintain the high standards associated with the Marks.
(g) Use best endeavours to increase the profits of the Business and provide the services.
(h) Not to bring the Services, System or Business into disrepute.
(i) Use all reasonable efforts to ensure that Franchisees deal fairly and honestly with all customers, handle all customer complaints speedily and fairly. Render prompt workmanlike, courteous and willing service and conduct the Business in such a manner as not to detract from or bring into disrepute the marks.
(j) Hold any additional goodwill generated by the Master Franchisee as bare Trustee for the Franchisor.
(k) Obtain a signed confidentiality undertaking in the form of a draft undertaking set out in Schedule II hereto from each employee present and in the future within 2 weeks from the date of commencement of employment or of the date of this Agreement, which ever shall be the later.
(l) Comply with all statutes, bye-laws and other regulations or requirements from time to time in force relating to the operation and conduct of the Business, with particular regard to ensuring that all statutory requirements as to safety standards and precautions are observed at all times.
(m) Comply with all procedures which the Franchisor may from time to time lay down for its Franchisees in order to ensure compliance with obligations advertised by the Franchisor and to assist in promoting the standard of the Services and the market for them.
(n) Permit the Franchisor and any person authorised by the Franchisor at all reasonable times to visit any premises from which the Master Franchisee administers the supply of the Services for the purpose of checking the quality of the Services being supplied and the manner in which the Business is being carried on and of inspecting the apparatus being used in connection with the Business.
(o) Maintain proper books of account as directed by the Franchisor, and preserve them for at least 3 years after the end of the relevant financial year. Such books of account shall include all supporting documents and correspondence relating to the Services which shall be made available to the Franchisor and any person authorised by it at such times and place as the Franchisor may reasonably require for the purposes of inspecting the same. The Master Franchisee shall permit the Franchisor and any person authorised by it to enter at all reasonable times and upon reasonable notice upon the premises on which may be any such book of account voucher supporting document or correspondence.
(p) Ensure that all Franchisees correctly return their gross income figures and return these together with the Master Franchisee’s own correct gross income figures to the Franchisor.
(q) Provide to the Franchisor:-
- (i) As soon as the information is available tothe Master Franchisee details of costings, pricings and techniques utilised in respect of carrying out unusual or distinctive types of work;
- (ii) Upon request by the Franchisor information in respect of the Master Franchisee’s and Franchisees’ employees’ wages structure, over-head expenditure, trading profits and all incoming telephone calls from Customers and prospective Customers.
(r) Further, not acquire any financial interests in the capital of a competing undertaking which would give the franchisee the power to influence the economic conduct of such an undertaking.
(s) Not furnish any information as to the methods of operation, publicity, profits, financial affairs, present or future plans or policies of the Franchisor or any other information relating to the operation of the Franchisor.
(t) Not be engaged in any similar business directly or indirectly which may compete with the Services or any part of them in the Territory or in any other area where it may compete with a member of the franchised network.
(u) Ensure that only the Equipment specified in Schedule III (as from time to time amended by the Franchisor) are used in the Business, unless in any particular case, a Franchisee can demonstrate beyond reasonable doubt that an alternative uniform item of at least the same standard is available elsewhere on more favourable terms. If such an alternative supply is found by a Franchisee, it may purchase the equipment and/or materials on those more favourable terms.
(v) Trains its own staff and Franchisees in the operation of the System in all its aspects, in the case of Franchisees to such a standard that will discharge the training obligations of the Franchisor under the Agreement.
(w) Not engage or seek to engage in the manufacture, sale or use of Materials which compete with the Materials.
(x) To sell the Materials only to franchisees, end-users, other sub-franchisors and resellers within other channels of distribution supplied by the Franchisor or with its prior written consent.
(y) Use its best endeavours to keep a minimum stock of the Materials as stated in Schedule III hereto.
(z) Communicate to the Franchisor any experience gained in exploiting the franchise, and other franchisees non-exclusive Know-how resulting from that experience.
In order to protect the Franchisor’s intellectual property rights and maintain the common identity and reputation of the franchised network the Master Franchisee shall use best endeavours to open, through its Sub-Franchisees, at least ten new outlets for the Services within one year of the date of this Agreement. In the event of the Master Franchisee failing in any year to use best endeavours to open the outlets stated in this clause, the Franchisor may within 90 days from the end of the relevant year serve a notice in writing on the Master Franchisee terminating its right to open any future outlet other than ones in respect of which a Franchise agreement has previously been granted.
7. Initial training
(1) The Franchisor will train the Master Franchisee’s initial General Manager in the operation of the Services. The training course will last for a period of two working weeks, and will be conducted at such place or places in Europe as the Franchisor shall require.
(2) The Franchisor shall also train the proprietors or General Managers of the Master Franchisee’s first five Sub-franchisees. The training course will be conducted in English, will last for a period of two working weeks, and will be conducted at such place or places in Europe as the Franchisor shall require.
(3) The cost of the training shall be covered by the Management Services free described in Clause 9 below. The Master Franchisee and the relevant Sub-Franchisee shall be responsible for the payment of:-
- (a) The full salary of their respective General Manager
- (b) The return business class air fare and all other reasonable travel expenses to, from and within the place of training of the Master Franchisee’s General Manager and the proprietor or General Manager of the Franchisees
- (c) Reasonable hotel accommodation plus the cost of food and other expenses properly incurred by the General Manager and Sub-Franchisees’ General Manager or Proprietor
- (d) All other incidental expenses.
8. Continuing training
The Franchisor will train any replacement General Manager of the Master Franchisee in the operation of the Services. The training course will last for a period of two working weeks, and will be conducted at such place or places in Europe as the Franchisor shall require.
9. Franchise and management service fees
(1) The Master Franchisee shall pay the Franchisor in pounds sterling the sum of £10,000 net of tax by way of initial fee payable as to:-
- (a) £5,000 on the execution of this Agreement;
- (b) £2,500 three months after the date of the execution of this Agreement;
- (c) £2,500 six months after the date of the execution of this Agreement.
(2) The Master Franchisee shall pay to the Franchisor a franchise fee at the rate of 10 per cent of the total value (excluding Value Added Tax) of all invoices rendered by the Franchisees during each accounting period before deduction of any taxes (other than Value Added Tax) expenses, commissions or other charges or debits whatsoever. The Master Franchisee shall also pay any Value Added Tax properly chargeable by the Franchisor on the said Franchise fee.
(3) The accounting periods in any year shall be periods of one calendar month.
(4) The Franchise fee shall be paid monthly by the Master Franchisee to the Franchisor in pounds sterling on or before the 10th day of the month following the month to which the fees relate.
(5) In the event of any default in the payment of any sum which may be due to the Franchisor by the Master Franchisee, the Master Franchisee shall, without prejudice to any other remedy that the Franchisor may have under this Agreement, or at law, pay to the Franchisor interest at the rate of 2 per centum per month, or part of a month, on the amount of any sums due but not paid, whether before or after judgment.
The Master Franchisee undertakes:-
(a) to provide the Franchisor not later than ten days after the end of each monthly accounting period, with a written detailed summary showing the aggregate and gross invoice value of all Services provided by the Sub-Franchisees during such period.
(b) The Master Franchisee shall diligently monitor the financial performance and accuracy of invoice returns of all Sub-Franchisees.
(c) The Master Franchisee shall within ninety days after the end of each financial year of the Sub- Franchisee submit to the Franchisor a period balance sheet and profit and loss account certified by an independent accountant (approved by the Franchisor) relating to the Business.
(d) The Master Franchisee shall collect from all Franchisees within ninety days after the end of their respective financial years a balance sheet and profit and loss accounts certified by an independent accountant, and forward the same to the Franchisor.
11. Promotion and advertising
In order to protect the Franchisor’s intellectual property rights and maintain the identity and reputation of the franchise network the Master Franchisee shall establish and maintain an advertising and promotion fund for the promotion of the Services within the Territory by imposing an advertising levy upon all Franchises of 1.5 per cent of their respective gross turnover, payable in the same manner as the Franchise fee specified in Clause 9(2) above.
12. The marks
(1) The Master Franchisee shall join the Franchisor in making any applications for the Master Franchisee to become a registered User. The Master Franchisee shall also ensure that at the Franchisor’s request the Sub-Franchisees shall apply for and become Registered Users of the Marks.
(2) The Master Franchisee acknowledges that it holds the use of the Trade Marks for the benefit of the Franchisor and undertakes to assign to the Franchisor any such rights therein which it may acquire upon being requested to do so by the Franchisor.
(3) The Master Franchisee shall at the Franchisor’s request enter into a Registered User Agreement with the Franchisor, in the form annexed hereto as from time to time reasonably amended by the Franchisor, and shall procure that each Sub-Franchisee shall do so.
(4) The Franchisor and the Sub-Franchisee shall co-operate in taking whatever steps are reasonably necessary to defend the Marks or the Franchisor’s assertion of rights over the Marks.
(5) The Franchisor gives no warranty that the Marks cannot be set aside.
(6) The Master Franchisee shall notify the Franchisor of any suspected infringement of the Marks or other rights of the Franchisor within the Territory and at the expense of the Franchisor to take such reasonable actions thereupon as the Franchisor directs.
(7) The Master Franchisee shall have the right to challenge the validity of the Marks subject to the Franchisor’s right to terminate the agreement as detailed in Clause 15(f) below.
(1) The Franchisor or its Auditor or authorised representative shall be entitled to inspect and audit the books of account and all supporting documentation of the Master Franchisee relating to the Master Franchisee’s Business at any time in respect of the whole or any part of the period of this Agreement and within six months after the receipt by the Franchisor of the audited account for the year or other period of this Agreement up to the termination of surrender of this Agreement or sale or transmission of the Master Franchisee’s Business to a new Master Franchisee by the Franchisor giving written notice to the Master Franchisee such inspection or audit to be during reasonable business hours.
(2) If the audit (or any other periodic inspection not being a full audit) shows that the accounting of the Master Franchisee as to the calculation of the Franchise fee and/or any other financial matter is incorrect, the Master Franchisee undertakes promptly to rectify the defect in the amount accounted for (together with interest on any sums outstanding, at the rate of 2 per cent above the base rate of National Westminster Bank Plc from time to time) and/or the accounting system defect as the case may be.
(1) The Franchisor shall have the right to terminate this Agreement, subject to Clause 15(2) below, without prejudice to any other rights or remedies available under this Agreement, if the Master Franchisee shall;
(a) Fail to commence the Business within the period of three months from the date of this Agreement.
(b) Neglect or fail to perform or observe any of the obligations or conditions undertaken by the Master Franchisee.
(c) In its franchise application or supporting details have provided the Franchisor with information which contains any materially false or misleading statements or omits any material fact which may make any statement misleading.
(d) Pass a resolution of Voluntary Winding-up (other than for amalgamation or reconstruction) or shall have a Petition of Winding-up presented against it or shall call a meeting of its creditors, or receivers, shall be appointed over its assets.
(e) Not pay or submit any sum or document required under the terms of this Agreement at the latest within twenty-one days following its due date.
(f) Cease or take any steps to cease the business.
(g) Cause the Franchisor to suspect on reasonable grounds that any confidential information concerning the Franchisor’s Business or particulars of any communication from the Franchisor to the Master Franchisee or his agents has been disclosed to third parties, and the Master Franchisee cannot reasonably satisfy the Franchisor that this is untrue.
(h) Challenge the validity of the Marks.
(2) (a) In the case of any default neglect or failure (which is capable of remedy) affecting the quality of the Services provided to the Customers, the Franchisor shall have the right to terminate the agreement if only the Master Franchisee fails to remedy such defect neglect or failure to the Franchisor’s reasonable satisfaction within 48 hours of the written notice thereof from the Franchisor.
(b) In the case of any other default neglect or failure the Franchisor shall have the right to terminate the agreement only if the Master Franchisee fails to remedy it within ten days of the written notice thereof from the Franchisor.
(c) In the case of persistent default neglect or failure, the Master Franchisee shall not be entitled to any period of grace within which to remedy any neglect default or failure. If any default neglect or failure occurs more than twice in any period of twelve consecutive months, this shall be deemed to be a persistent default, failure or neglect.
15. Consequences of termination
Upon the termination of this agreement:
(a) The Master Franchisee undertakes:
- (i) To cease forthwith to advertise or make use of the Marks and to return to the Franchisor all copies and translation of the Manual and all stationery documents, promotional materials, signs and other items then in its possession or under its control owned by or relating to the Franchisor or the Services or the Business or the Marks whether or not they shall have been supplied by the Franchisor and the Franchisor shall have the right to enter upon the premises of the Master Franchisee to ensure that all of the obligations of the Master Franchisee howsoever arising are being complied with.
- (ii) To take all such steps as the Franchisor may reasonably require to ensure that the Master Franchisee is removed from the Trade Marks Register as a Registered User, and
- (iii) To pay to the Franchisor any and all sums due at or after the date of termination to the Franchisor howsoever arising and without any right of deduction or set-off, and thereafter to pay to the Transferor any sums subsequently discovered to be due to the Franchisor arising out
- (iv) To return to the Franchisor all manuals, service specifications, book-keeping and accounting procedures in its possession and not to keep any copies thereof.
(b) The Master Franchisee undertakes not at any time thereafter:-
- (i) To disclose to any third party or directly or indirectly to make use of the Manual or of any confidential information, trade secrets or Know-how relating to the Business, the System, the Services or the Franchisor acquired by the Master Franchisee during or as a result of this Agreement except that which has become generally known or easily accessible other than by breach of an obligation by the Master Franchisee.
- (ii) To make use in any manner of the Marks or any name, slogan or device similar thereto or which may be confusing therewith or which may reasonably be considered to impute an association therewith.
- (iii) To purport to be a Master Franchisee of or otherwise associated with the Franchisor or advertise or promote itself as having been a Master Franchisee of the Franchisor.
- (iv) To use directly or indirectly any of the Franchisor’s
(c) The Master Franchisee shall immediately upon termination assign to the Franchisor or its nominee (but subject to the Franchisor or its nominee assuming the future burden thereof) all Franchise agreements granted by the Master Franchisee including those granted to subsidiaries of the Master Franchisee.
(d) The Master Franchisee shall immediately upon termination cease trading as a franchisee in all Company owned operations, unless the Franchisor shall specifically agree, and the Franchisor or a nominated Area Master Franchisee enters into a unit Franchise Agreement with such operations.
(e) The Master Franchisee shall not for one year after termination directly or indirectly be connected with a business in the Territory similar to the Business nor otherwise compete with or assist anybody else to compete with the Franchisor nor its Area Master Franchisee or Franchisees in the Territory.
(f) The Master Franchisee shall not within theTerritory at any time solicit customers of the Franchisor or of any franchisee of the Franchisor (or of a Master Franchisee appointed by the Franchisor).
(g) The Master Franchisee shall not at any time use or duplicate the Business or the System or any part thereof.
(h) In order to ensure that each and every part of this clause shall be carried out by the Master Franchisee, the Master Franchisee hereby grants to the Franchisor in accordance with Section 10 of the Power of Attorney Act 1971 the power to take as the Master Franchisee’s Attorney any action necessary to ensure the Master Franchisee’s compliance with this Clause.
16. Assignment by franchisor
The Franchisor shall be entitled to assign the benefit of this Agreement to any other party at any time, subject to the Assignee assuming responsibility to discharge the Franchisor’s obligations to the Master Franchisee and the Franchisor shall inform the Master Franchisee thereof in writing within a reasonable time thereafter.
19. Applicable law
21. Whole agreement
22. Force majeure
AS WITNESS the hands of the parties hereto the day and year first before written
For and on behalf of the Franchisor
For and on behalf of the Master Franchisee
Registered user agreement
(1) 2 X MARK V ISOTONIC FOOT WAGGLER
Manufactured by F Heicder GMbH of Germany
(2) 5 X TINY TIMMY TOE TONER
Manufactured by Berkinsmaw & Co Ltd of UK
(3) 3 X BENIGN – ANKLE BOOSTERS
Manufactured by G E Rookey & Sons Ltd of UK
(4) 2 X A1500 NAIL SCRAPPERS
Manufactured by G E Rookey & Sons Ltd of UK
(1) Les Pieds D’or
Early day foot lotion ……… 10,000 packs
(2) Les Pieds D’or
Oily boy toe tonic ……… 15,000 packs
(3) Les Pieds D’or
Eau d’ankle ………. 10,000 packs
(4) Les Pieds D’or
Big toe grease mix ……… 15,000 packs