Franchise Agreement - Template, Sample Form to Fill out Pro · PH-law

FRANCHISE AGREEMENT

KNOW ALL MEN BY THESE PRESENTS:

This Franchise Agreement (the "Agreement") is made and executed this ________ day of ________, 20________, at the City/Municipality of ________, Province of ________, by and between:

________, a stock corporation duly organized and validly existing under and by virtue of the laws of the Philippines, with principal address at ________, with Securities and Exchange Commission Registration No. ________ and Taxpayer Identification No. ________, represented in this act by ________, who holds the following position: ________, duly authorized for this purpose by virtue of a Secretary's Certificate/Board Resolution dated ________, hereinafter referred to as the "Franchisor".

- and -

________, a stock corporation duly organized and validly existing under and by virtue of the laws of the Philippines, with principal address at ________, with Securities and Exchange Commission Registration No. ________ and Taxpayer Identification No. ________, represented in this act by ________, who holds the following position: ________, duly authorized for this purpose by virtue of a Secretary's Certificate/Board Resolution dated ________, hereinafter referred to as the "Franchisee".

The Franchisor and the Franchisee shall hereinafter be referred to individually as a "Party" and collectively as the "Parties".

WITNESSETH: That —

WHEREAS, the Franchisor is a duly organized business entity under the laws of the Republic of the Philippines and is engaged in the following business:

________;

WHEREAS, the Franchisor has developed, obtained, and expended considerable time, effort, and resources to create the above-described business, which the Franchisor wishes to expand;

WHEREAS, the Franchisor agrees to enter into a Franchise Agreement with the Franchisee under the name of ________, which is the Franchisor's branded mark;

WHEREAS, the Franchisor is willing to allow the Franchisee to form part of the Franchisor's chain business based on the Franchisee's agreement to the terms and conditions stated herein;

NOW THEREFORE, for and in consideration of the foregoing premises and the mutual covenants hereinafter set forth, and pursuant to Articles 1156, 1305, 1306, and 1318 of the Civil Code of the Philippines, the Parties hereby agree as follows:

Art. I. DEFINITIONS

§ 1. Marks: The marks owned by the Franchisor, including but not limited to the Franchisor's brand mark, ________, as well as any and all other names, trademarks, logos, designs, or other commercial symbols or copyrighted materials now designated or referred to by the Franchisor, by which the Franchisor identifies the System, registered or registrable with the Intellectual Property Office of the Philippines pursuant to Republic Act No. 8293 (Intellectual Property Code of the Philippines). Specifically, the following are the Marks referred to by the Franchisor:

________;

§ 2. System: The trade knowledge, skills, experience, techniques, goodwill, and intellectual property rights in the specifications, design, marketing, licensing, operation, and franchising of the business of the Franchisor as identified by the Marks, as well as the development, operation, promotion, and utilization of the Franchise Business, including the products to be sold and the procedures for producing the same.

§ 3. License: The rights of the Franchisee to make use of the Marks and the System within the Location and within the Term referred to in this Agreement.

§ 4. Term: The period of time within which this Agreement and the rights granted hereunder shall subsist.

§ 5. Gross Sales: The total revenue from products sold pursuant to this Agreement.

§ 6. Location: The particular geographic location where the Franchisee is allowed to operate the Franchise Business and use the License. The approved Location shall be at: ________.

§ 7. Business: The ownership by the Franchisee of the License and the right to operate under the same pursuant to the provisions of this Agreement.

§ 8. Products: The following are the products that will be sold through the Business:

________;

§ 9. Commencement Date: The commencement of this Agreement shall be on: ________.

§ 10. Opening Date: The estimated date of the opening of the physical premises shall be on: ________.

Art. II. LICENSE GRANTED

§ 1. The Franchisor hereby grants to the Franchisee the right to carry on the Business in accordance with this Agreement from the approved premises, to utilize the System, and to use the Marks during the period of this Agreement and subject to the terms and conditions hereof.

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Art. III. TERM

§ 1. The Term of this Agreement shall commence on the date provided herein and shall expire upon the lapse of the period stated, unless sooner terminated in accordance with the grounds for termination provided elsewhere in this Agreement. In case of ambiguity as to the date of commencement, the date of signing by the Parties shall be deemed the date of commencement.

§ 2. The Term shall be effective for the following period: ________, reckoned from the Commencement Date listed elsewhere in this Agreement or in accordance with the preceding paragraph.

Art. IV. RENEWAL

§ 1. Should the Franchisee provide written notice of its intent to renew this Agreement, and should this Agreement be valid and in effect with no subsisting breach of obligations by the Franchisee at the time of notice, the Parties shall enter into a new standard Agreement in the form then currently offered to new franchisees, which shall commence upon the expiration of this Agreement and shall be executed within a reasonable time after approval of the written notice of renewal.

§ 2. The written notice of renewal shall be given within the following period prior to the expiration of this Agreement: ________, the approval of which shall be subject to the sole and exclusive discretion of the Franchisor.

§ 3. Any and all rights of the Franchisee relating to the physical premises, including real rights under a lease contract extending beyond the Term, shall not cause automatic renewal, and this risk shall be borne by the Franchisee. This Agreement confers no right upon the Franchisee to compel renewal, nor imposes any obligation upon the Franchisor to accept or approve any application for renewal.

Art. V. TERMINATION

§ 1. Should the Franchisee fail to commence operations on the Opening Date, the Franchisor may, at its sole and exclusive discretion:

A. Allow the Franchisee reasonable time to make the necessary preparations to commence operations; or

B. Require the Franchisee to execute a new agreement with a different Opening and Commencement Date.

§ 2. A material breach of this Agreement shall give rise to its termination by the Franchisor, which shall include the following:

A. Fraudulent acts or material misrepresentation on the part of the Franchisee before, during, or after the execution of and in connection with this Agreement;

B. Conviction of the Franchisee by final judgment of a crime involving moral turpitude or an offense in connection with the conduct of the Business;

C. The commission by the Franchisee of any act infringing or tending to infringe any intellectual property right owned by the Franchisor related to the Business;

D. Loss by the Franchisee of the right to operate within the approved Location;

E. Absconding or abandonment of the Business by the Franchisee, or where the Franchisor reasonably believes the Franchisee will abscond or abandon the Business;

F. Insolvency or bankruptcy of the Franchisee;

G. A claim or levy made against the Business of the Franchisee, including rights and properties appurtenant thereto;

H. Failure by the Franchisee to pay dues, fees, or other amounts due and demandable under this Agreement;

I. The commission by the Franchisee of any act that tends to damage or disparage the reputation and goodwill of the Franchisor.

§ 3. The foregoing enumeration is not exhaustive, and any similar act may constitute a material breach and a cause for termination of this Agreement.

§ 4. The Franchisee shall receive written notice of termination clearly stating the grounds constituting the material breach, given by the Franchisor prior to termination. For good cause shown, the Franchisee may be given the opportunity to explain and remedy the said grounds within a reasonable time, subject to the discretion of the Franchisor.

§ 5. Termination of this Agreement shall give rise to the following rights of the Franchisor:

A. The Franchisor shall retain any fees or amounts paid by the Franchisee under this Agreement;

B. The Franchisor may purchase the interest or rights of the Franchisee over tangible assets acquired pursuant to this Agreement, including equipment, products, furniture, fixtures, and real property rights such as commercial rent or premises, the valuation of which shall be made by an independent appraiser;

C. The Franchisor shall retain all rights granted after termination, including the remedies herein provided.

§ 6. Termination shall not release the Franchisee from those obligations which survive termination, whether by material breach or expiration, and shall give rise to the following obligations of the Franchisee:

A. To cease and desist from using the Marks and the System or any conduct tending to use them;

B. To surrender all materials provided by the Franchisor containing any intellectual property of the Franchisor, including manuals, advertising and marketing materials, data sheets, memoranda, or written instructions;

C. To cause the removal of fixtures, signs, displays, or advertisements showing the Marks or identifying or distinguishing marks of the Franchisor;

D. To pay all fees due and demandable to the Franchisor under this Agreement, including costs, expenses, and damages incurred by the Franchisor.

Art. VI. OBLIGATIONS OF THE FRANCHISOR

The Franchisor shall ensure that the Franchisee's conduct of the Business conforms to the standards imposed, and agrees:

A. To provide information in the form of a Manual containing the System, which shall serve as the guide for the Franchisee in the conduct of the Business;

B. To maintain and update the Manual from time to time, with any change duly communicated to the Franchisee;

C. To assist the Franchisee in the pre-opening of the Business and to guide the Franchisee in the establishment and efficient operation of the Business during the initial stages, such assistance being provided at the Franchisor's discretion as it deems appropriate;

D. To indemnify and hold the Franchisee harmless against any claim arising from the Franchisee's use of the Marks constituting infringement of the rights of any third party; provided that the Franchisee immediately notifies the Franchisor in writing of any such action or claim and assists in its defense and settlement;

E. To provide training to the Franchisee's personnel before the Opening Date, including assistance in hiring and selection, provided that the Franchisor shall not be obligated to train or hire more than is reasonably necessary;

F. To provide guidance and assistance as it deems appropriate before and during the Opening Date;

G. To provide instructions regarding standards for layouts, design, and configurations, whether interior or exterior, including furniture, fixtures, brand materials, and equipment;

H. To conduct inspections to ensure compliance with the standards imposed;

I. To provide continuous assistance through advisory opinions, instructions, and information in the form of updated memoranda, data sheets, and other relevant business materials;

J. To inform the Franchisee of all developments and changes to the products of the Business.

Art. VII. OBLIGATIONS OF THE FRANCHISEE

§ 1. Fees

1.1. Initial Fee: The Franchisee shall pay the Initial Fee of ₱________ (________) to the Franchisor in exchange for the rights granted hereunder and in consideration of the commencement and opening of a new Business. The Initial Fee shall be paid immediately upon signing this Agreement and shall be non-refundable. Failure to pay the Initial Fee shall entitle the Franchisor to declare this Agreement void ab initio, to retain any portion already paid, and to cease all obligations on its part, subject to the provisions of this Agreement.

1.2. Franchise Fee: The Franchise Fee shall be paid as a fixed single payment of ₱________ (________) immediately upon signing this Agreement.

1.3. Royalty Fee: The use of the Marks by the Franchisee shall be subject to a Royalty Fee in a fixed amount of ₱________ (________), payable monthly beginning immediately upon signing this Agreement.

1.4. Penalty: The Franchisee shall be liable for penalties for failure to pay any fee on the date it becomes due and demandable, equivalent to ________% of the amount due, without prejudice to legal interest under Article 2209 of the Civil Code of the Philippines.

1.5. Payment: The aforementioned fees shall be deposited in the following account:

Account number: ________

Account name: ________

Bank/E-wallet: ________

§ 2. Reporting

The Franchisee agrees to submit a detailed report of the performance of the Business, including its Gross Sales, on a periodic basis subject to the Franchisor's instructions, and in the absence of such instructions, on a monthly basis.

§ 3. General Obligations

The Franchisee agrees to comply with and maintain the high standards imposed by the Franchisor, including the protection of intellectual property rights and the diligence to protect the goodwill of the Business. The Franchisee agrees:

A. That the Marks shall be used in accordance with the Franchisor's instructions, and no other mark shall be used;

B. That the instructions and written Manual provided by the Franchisor shall be followed in the conduct of the Business;

C. That the Business shall be operated only within the specified Location according to the operating standards imposed;

D. That recommendations of the Franchisor as to improvement, change, modification, replacement, maintenance, and upkeep of the physical premises shall be followed at all stages of operations;

E. That the Business shall be carried out at the designated Location and shall not be changed without prior written approval of the Franchisor;

F. That the commencement of the Business shall begin on the date listed in this Agreement;

G. That the requirements of the Franchisor, as updated from time to time, shall be diligently complied with.

§ 4. Obligations to the Franchisor's Intellectual Property Rights

The Franchisee acknowledges that the Franchisor is the owner of the intellectual property rights referred to herein and that the Franchisee has no ownership over the Marks or other intellectual property rights. The Franchisee agrees:

A. That the Marks shall be used solely and exclusively for making known, advertising, and promoting the brand, in accordance with the Franchisor's instructions and always in connection with the Business;

B. That it shall not prejudice or damage the goodwill of the brand nor use the Marks in any manner resulting in disparagement of the Franchisor's reputation;

C. That the advertisement of any marketing material shall be subject to the Franchisor's prior approval;

D. That it shall comply with the Franchisor's instructions as to any modification of the Marks, the cost of which shall be borne by the Franchisee;

E. That it shall ensure the Marks are presented in devices, equipment, or product presentations in accordance with the Franchisor's specifications and instructions;

F. That it shall not sublicense, assign, transfer, sell, or allow any third party to use the Marks;

G. That it shall not hold itself out as an agent of the Franchisor, but shall adhere to the Franchisor's instructions as to identifying itself as a licensee or franchisee;

H. That the selection of equipment and use of the Marks thereon shall comply with the Franchisor's specifications;

I. That it shall immediately notify the Franchisor in writing of any infringement of the Marks or other intellectual property rights committed by any person not connected with the Franchisor.

Art. VIII. CONSTRUCTION

The Parties agree that the construction of the physical premises shall be made in the following manner:

________;

Art. IX. NON-COMPETITION

During the Term of this Agreement and for the following period: ________, reckoned from the date of termination, whether by expiration, declaration of nullity, or material breach, the Franchisee shall be prohibited from engaging, directly or indirectly, in any business in competition with the Franchisor's Business within the area covered by the approved Location and its reasonable vicinity. The Parties acknowledge that this covenant is limited as to time, place, and scope in conformity with prevailing Philippine jurisprudence. In particular, the Franchisee agrees:

A. That it shall not solicit customers or clients of the Franchisor for purposes of obtaining business, supplying, selling, or offering competing products or services;

B. That it shall not employ or attempt to employ the personnel, employees, staff, officers, or affiliates of the Franchisor within the same period;

C. That it shall not make use of any trade secret or confidential business information obtained during, before, or after the course of this Agreement within the same period.

The foregoing enumeration is not exhaustive, and any act of the Franchisee that competes with or gives it a competitive advantage over the Franchisor shall be dealt with according to the remedies provided by law.

Art. X. INSURANCE

The Franchisee shall obtain and maintain insurance coverage acceptable to and pursuant to the directives of the Franchisor, coterminous with the Term of this Agreement, subject to the following requirements:

________;

Art. XI. CONFIDENTIALITY AND DATA PRIVACY

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§ 2. The Parties shall comply with Republic Act No. 10173 (Data Privacy Act of 2012), its Implementing Rules and Regulations, and the issuances of the National Privacy Commission in the collection, processing, storage, and disposal of any personal data obtained in connection with this Agreement.

Art. XII. DISPUTE RESOLUTION

In the event of any dispute, controversy, or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity, interpretation, breach, or termination, the Parties shall first endeavor to settle the same amicably through mutual negotiation in good faith. Should the Parties fail to reach an amicable settlement within a reasonable period, the dispute shall be submitted to arbitration in accordance with Republic Act No. 9285 (Alternative Dispute Resolution Act of 2004). Without prejudice to the foregoing, the Parties agree that the proper courts of ________ shall have exclusive jurisdiction over any judicial action arising hereunder, to the exclusion of all other venues.

Art. XIII. SUPPORTING DOCUMENTS AND ADDITIONAL ACTS

The Parties agree to execute such other documents as are reasonable and necessary for the proper implementation of this Agreement.

Art. XIV. APPLICABLE LAW

This Agreement shall be governed by and construed in accordance with the laws of the Republic of the Philippines.

Art. XV. WAIVER

The failure of either Party to insist, in one or more instances, upon the strict performance of any term of this Agreement shall not be construed as an abandonment, cancellation, or waiver of such term. No waiver shall be deemed made unless expressed in writing and signed by the waiving Party. No waiver of any term shall constitute a waiver of any other term or of the same term on a future date.

Art. XVI. COUNTERPARTS

This Agreement may be executed in counterparts, all of which constitute a single agreement. If the dates of signature differ, this Agreement shall be effective as of the date both Parties have signed.

Art. XVII. SEVERABILITY

The invalidity of any portion of this Agreement shall not affect the validity of any other provision. Should any provision be held invalid, the remaining provisions shall remain in full force and effect as if the invalid provision had been expunged.

Art. XVIII. CUMULATIVE RIGHTS

The rights of the Parties under this Agreement and the law are cumulative and shall not be construed as exclusive unless otherwise required by law.

Art. XIX. HEADINGS

Headings are for convenience only and do not affect the interpretation of this Agreement.

Art. XX. SUCCESSORS AND ASSIGNS

This Agreement shall be binding upon the successors and assigns of both Parties.

Art. XXI. ENTIRETY OF AGREEMENT

This Agreement represents the entire agreement between the Parties and supersedes all prior negotiations, representations, and agreements, whether oral or written.

Art. XXII. AMENDMENTS AND MODIFICATIONS

This Agreement may be amended only by a written instrument signed by both Parties.

Art. XXIII. FORCE MAJEURE

Neither Party shall be liable for failure to perform due to causes beyond its reasonable control, including fortuitous events under Article 1174 of the Civil Code of the Philippines, such as acts of God, acts of civil or military authorities, riots, embargoes, natural disasters, and other unforeseen events or events which, though foreseen, could not be reasonably avoided.

Art. XXIV. LISTED DATES

The Franchisee agrees that the commencement of operations of the Business shall be subject to the prior approval of the Franchisor after reasonable determination that the Franchisee has adhered to the instructions and specifications provided. The Opening Date may be postponed to a later date if the Franchisor reasonably believes that other necessary preparations must be settled prior to commencement.

IN WITNESS WHEREOF, the Parties have hereunto affixed their signatures on the date and place first stated above.

________
Franchisor

By:

________
________

________
Franchisee

By:

________
________

SIGNED IN THE PRESENCE OF:

________       ________

ACKNOWLEDGMENT

REPUBLIC OF THE PHILIPPINES  )
PROVINCE OF ________  )
CITY OR MUNICIPALITY OF ________  ) S.S.

BEFORE ME, a Notary Public for and in the City or Municipality of ________, this ________ day of ________, 20________, personally appeared the following persons:

1. ________, the duly authorized representative of ________, with the following competent proof of identification: Driver's License with number ________ which expires on ________;

2. ________, the duly authorized representative of ________, with the following competent proof of identification: Driver's License with number ________ which expires on ________.

known to me and to me known to be the same persons who executed the foregoing Franchise Agreement, consisting of ________ pages, including this page where the Acknowledgment is written and signed by the Parties and their instrumental witnesses, and they acknowledged to me that the same is their free and voluntary act and deed, as well as that of the entities they represent.

WITNESS MY HAND AND SEAL on the day and place first above written.

________
Notary Public

Doc. No. ________;
Page No. ________;
Book No. ________;
Series of ________.