Franchising is the legal for business commitment of parties, franchisor and franchisee.
The first contract may reflect the intent to create a legal contract between you and the franchisor, be it at the exhibition or an event you attended. You may sign a Letter of Intent (LOI) or Memorandum of Understanding (MOU), to signify your engagement with them.
Before you start sourcing for the right franchising partnership, you may want to consult some legal personnel on franchising. Franchising is a business model that governs two or more parties to form a consortium or alliances to run a profitable business.Here are some key points that you may consider:
- your financial commitment
- develop a checklist for your choice franchising
- what to cover in the franchise agreement
- the franchise period
- initial fees
- types of support from franchisor
- key man (your initial contact person)
- operation manual
- training
- store set-up
You would surely want to have some commitment prior to sourcing for the right franchising. What suit you best may not be what franchisor is offering. How do you going to make the concession – adapting to your conditions.
Franchisor may request monthly reports and these may be substantial as you would need to incur manpower and cost to provide such information. This is another area of concern.
The Franchising agreement may need you to submit monthly sales figure. Initially you may not take into consideration or return, discounts or goods and service tax. You may be thinking of the net sales and the franchisor is of gross sales figure for the percentage of sales as royalty fee.
Therefore it is good for you together with franchisor to define some terms for interpretation.
Lastly, you may want to put a clause that the official agreement or legal contract shall the document for reference; any documents prior to this should be void. This will protect you for franchising.
