Why should you become a franchisee?
What are the obligations of a franchisee?
The most important obligations of a franchisee are:
- promote sales of the goods and/or services of the franchise system
- adhere to the principles and instructions stipulated in the franchise manual
- set up and manage the franchise business in accordance with the instructions of the franchisor
- write reports and disclose conditions that are important for the franchise system
- pay the agreed entry fee, franchise fees, advertising fees etc.
The section “Obligations of the Franchisee” in the franchise agreement generally lists the individual obligations of a franchisee towards the franchisor. Franchisees are, therefore, permitted and obliged to use the service package provided by the franchisor in accordance with the stipulations of the contract. The contribution made by franchisees consists of supplying the work, capital and information required. They are obliged to treat the know-how passed on to them with the strictest of confidence throughout the whole of the contractual term and adhere to the no-competition clausefor at least the period of the contract.
Franchisees are obliged to implement the business concept in accordance with the regulations of the system, to treat in-house know-how as strictly confidential and to pass on business data to the systems head office that is important for running the network. Franchisees pay a one-off entry fee for the preliminary services provided by the franchisor as well as regular licence fees for the on-going support given by the systems head office.