1. Emergence And Evolution
Fundamentally the Franchising or Commercial Franchise is a system to facilitate the commercialization of goods and services.
At present, due to the globalization of the economy, the globalization of trade flows, by virtue of the conjunction of scientific and technological advances, applied to production and marketing, certain products and services have taken on universal prestige, which are recognized by all both for its brand and its symbol.
Specifically, it is a contract in which the franchisor intervenes on the one hand, granting the other party to the agreement -the franchisee- the possibility of producing, developing, marketing a product or services with a brand and symbol of their property. In return, the franchisee will pay a price, called a royalty or income right or percentage to the franchisor.
The defining element of Franchising lies in the fact that the franchisee will obtain the possibility of reproducing a method, format and experience in their undertaking, which has already been successfully tested by the franchisor.
"Franchise" is defined as an exemption, and historically it has the meaning of a privilege. In the privilege of medieval cities that had frank letters, which gave the city autonomy, free movement and were essentially exempt from paying taxes.
Today, Franchising is a well-known system and we can all see it in large brands and symbols installed all over the world, such as Hertz Rent - a - Car or perhaps the best known example for Uruguayans, which is undoubtedly Mc Donald's, that in 1954 it began to adopt this system to market its fast foods and that currently has more than 11,000 franchisees.
Already in the middle of the last century, Singer Sewing Machine Company, franchised independent dealers in various territories, to whom it authorized the marketing of its products and the use of its trademark -Singer-.
In the 90s of the last century, General Motors used franchising to promote and increase the placement of its cars; and Coca Cola granted franchises to bottle and market its well-known product.
In the first decades of this 20th century, the most important companies began to perceive the advantages of using franchising to expand the commercialization of their products and services. Other automakers quickly adopted the system that General Motors had tried. Then followed supermarket chains, or fast food establishments.
Also already before the Second World War, the oil companies that marketed fuels and lubricants -mainly- to the public, created large networks of franchisees, which generated large networks of service stations -now servicentros- that persist today.
It was after the great world conflagration that Franchising took a phenomenal boom. The International Franchising Association defines the commercial franchise as a method for the commercialization of products or services, it is a contractual relationship between a franchisor and a franchisee in which the former offers to maintain a continuous interest in the franchisee business that operates under a name Common, it is identified with the symbols of the former, using techniques and methods that are transferred to its own business organization, which operates under its responsibility and risk, but which is permanently supervised by the franchisor.
2. Format franchising - business format franchising
We have already established that franchising is a system of commercialization of goods and services, where the franchisor grants the franchisee the possibility of commercializing his product or service, under his brand and symbol, receiving in return the payment of royalties. We clearly establish that the franchisee is an independent merchant, he is an entrepreneur who sets up his business, with his capital, under his responsibility and risk. There is no dependency relationship between franchisee and franchisor, he is not an employee of the latter; but there may be a very complex relationship between them, as they establish a link that involves coordinating actions and transferring knowledge and experiences. It is based on this that fundamentally a distinction is made between the so-called Format Franchising and Business Format Franchising.
In the Format Franchising or commercial franchise, -which is the traditional franchise- in its first experiences, to which we have referred, it is basically a contract by which a manufacturer grants its franchisee the distribution of its products, within certain conditions (which we will see later), allowing you to use your brand and symbols to promote the commercialization of goods or services.
In the Business Format Franchising, the contractual relationship is richer and more complex in that although the exclusivity is granted within a territory to commercialize certain goods or services, jointly the franchisee is authorized to use the franchisor's brand and symbol, but this It also transfers a methodology to conduct the business, with permanent assistance in what its essential and distinctive elements imply, and also exercises strict control that the commercialization of its goods or services is carried out within the established framework. The franchisor establishes a detailed operating scheme and permanently monitors that it is complied with.
It is worth saying that what differentiates the Format Franchising and the Business Format Franchising more clearly, is this aspect recently mentioned.
In the Format Franchising, the franchisor (owner of the brand) grants the franchisee the possibility of commercializing their goods or services, it is almost a resale operation, where it is not required to operate within a rigid scheme, but is allowed act freely and use the owner's trademark and symbols.
In the Business Format Franchising there is first and in a transcendent way a teaching activity of the franchisor, who transfers his experiences to the franchisee, teaches him to use certain techniques and establishes a rigid method within which he develops the commercialization of goods or services.
In this modality, the franchisor permanently helps, assists and supervises the franchisee, this being the distinctive element that differentiates it from the traditional franchise.
Concept and characteristics of the franchising contract
Franchising is a marketing system, which we can locate as a distribution system. Thus, a coordination and cooperation organization is established, at the apex of which is the franchisor, who is linked with other legally independent entrepreneurs, who have set up their businesses with their own capital, under their responsibility and risk, forming a lasting cooperation unit. The organization appears in the market and before the public with a uniform image, where the franchisor establishes the criteria, describes the method, explains and trains the franchisee, and supervises his performance, ensuring the operation of the system.
In this way, the main obligations of the franchisor arise, granting authorization for the use of the brand and symbols; teach and train the franchisee, supervise and assist him, in the development of the system; Providing it with goods where appropriate, distributing punctually and correctly the products and elements necessary for its development.
For his part, the franchisee, who has set up his company, naming capital, his work and that of his collaborators, must behave as a "good businessman", abiding by the directives of the franchisor in the development of the business.
From the concept of Franchising that we have indicated above, we can specify the following characteristics:
First, it involves two independent and self-employed traders entering into a contract to develop a business.
Second, the complex contractual relationship that Franchising implies, leads to generating a range of specific points of close connection between the activities of the parties, which forces them to have a relationship of collaboration and cooperation. The franchisor must act by developing the business and the franchisee must endeavor to act in accordance with the directives of the former.
Third, as we have pointed out, it is a typical business collaboration contract, a distribution contract in a broad sense. By virtue of this, Franchising implies establishing a lasting relationship over time. In the same way, the franchisor will tend to have relationships, while lasting, as uniform as possible, since it must standardize its relationship with all its franchisees, so it will be essential, for an adequate development of the venture, to standardize its relationship with them. For this reason, the authors point out as characteristic of Franchising, that it is a contract of duration and uniform, which tends to group companies integrating them into the development of a business.
Fourth, and somewhat as a result of the characteristic listed above, the franchisor's obligations far exceed the obligations contracted by the giver in the distribution contract.
As we have already said, in franchising, it is about repeating, copying in an identical way the business developed by the franchisor, and that has been successful. Therefore such reproduction must be done in the most faithful way. This means that the franchisor must develop a very intense activity. It will not be enough to deliver the products to be marketed, or to facilitate the service object of the Franchising.
The grantor must provide all the necessary elements for this purpose, which implies training, teaching the franchisee, making him skilled in the management of techniques and in the implementation of the system, whether in production, marketing, in the operation of the business, etc… The franchisor must train and supervise the franchisee, and continue to permanently develop the venture. It is not enough today as in traditional Franchising, Format Franchising, to grant authorization for the use of the brand and deliver the products to be marketed. The accumulation of obligations of the franchisor is another characteristic of this contract.
Fifth, there is a correlation on the part of the franchisee, of a series of obligations, which exceeds the usual ones of a distributor. Although as we have left the year, the franchisee is an autonomous and independent merchant, who assumes the responsibility and risk of his business as an entrepreneur, he is integrated into a network of merchants who must act with a collaborative criterion, adjusting their actions, both in the preparation, production, marketing, management, etc., to the instructions and specifications of the grantor. This is another characteristic that distinguishes Franchising from other contracts, along with also peculiar elements such as the authorization of the use of the brand, of the symbols, of the transfer of Know-how, technical assistance, etc.
3. Typical components of franchising
In the following lines we will briefly refer to pointing out the typical components of the Franchising contract, we will describe what most of the doctrine calls typical or basic elements of the agreement, which mark in it, the most significant edges and which give it its originality and they distinguish it from other contracts, such as distribution and concession contracts.
a) Brand and symbol. We have pointed out that there is in this relationship a franchisor who authorizes the franchisee to develop a business that pretends to be the faithful copy of that one. Therefore, it is necessary that there be a trademark owner, who grants the franchisee the right to use a trademark owned by him and his symbols in his own undertaking. The franchisee will identify your company with the brand and symbols that have been licensed.
b) Transfer of experience, technology and modus operandi, etc. This second typical component of Franchising is what is called the transfer by the franchisor of the "Know - how" of the business. This implies that you must transfer all your knowledge and experience in the development of the company.
He is obliged to let the franchisee know all the details of the business, train him for the assembly and start-up of the company and assist him continuously so that this new venture is identical to that of the franchisor and the same and successful result is reached.
The Franchising contract; It will express in detail, not only the elements that the franchisor must transfer, in terms of machines or instruments, but also fundamentally; assistance related to the operational management of the business; the training of human resources in their various specialties, details for the characteristics of the premises, their furnishing and decoration, criteria for the acquisition of inputs, systems for administration, accounting, quality evaluation of products or services. The franchisor transfers the entire operating method of the business, it is about successfully repeating the experience of the owner.
c) The Franchisee. This component, which would seem unnecessary to detail, in franchising, an intuito personae contract, the qualities of the franchisee are essential; even if it is a person or a plurality of these numbered in a society. So much so that the death or incapacity of the franchisee, or the dissolution of the company, are cause for the termination of the contract, depending on the fact that their successors may lack the qualities that made the franchisee the person -or the company- adequate. to drive the franchise.
d) Zone of exclusivity. The territorial element is also a basic component of Franchising, which can be decisive in the success of the venture; the franchisor grants the franchisee exclusivity in a territory.
e) Consideration. The basic component in each onerous contract such as Franchising, is the one related to the sums that the franchisee must pay and which has been called royalties. In this sense, we must point out that the payment modalities by the franchisee can be diverse. Commonly, the franchisor requires a sum of money to enter the network, and then the payment of sums periodically. In each case they are established in a specific way, so we cannot indicate a single modality.
Eventual Components of Franchising
Under this heading we now have to list some elements that are usually contemplated in the Franchising contract, but that the doctrine has considered that they are not essential, that is, they are not the elements that define this contract, and that may not be present.
We will start with the clauses that prohibit competition. In this sense, the franchisor tries to avoid, through a clause inserted in the agreement, that the franchisee participates in competitive businesses during the time of the franchise and for a time after the termination of the franchise.
Another possible component is the reservation or confidentiality clause. This provision inhibits the franchisee from divulging the Know How of the business. In other words, you must reserve the teachings, techniques, experiences that you have transferred to the franchisor.
As in the previous case, the reserve duty remains in force even after the contract is terminated.
We now continue with the supply clause, which translates the owner's concern that the franchisee network presents a homogeneous level of appearance and quality of the products or services marketed.
The franchisor has the duty and the very special interest to take care of the way of presenting the business, therefore it will establish to the franchisee, certain conditions in the materials used, the characteristics of the personnel employed in the company that will carry out the franchise, their uniforms, behavior and routines, etc.
As can be seen, it is essential for the franchisee to take care that all the supplies used in the network ensure the uniformity and quality of the products or services sold.
This type of clause may be accompanied by others that establish what services the franchisee can outsource; or what type of supplies can be purchased from third parties, establishing those that must -and in what quantity- must acquire from the franchisor or whoever it indicates.
It is also occasional, although quite common, the stipulation of criteria referring to advertising.
For obvious reasons, the marketing of the product or service object of the Franchising will be under the direction of the owner or franchisor, who has an interest in maintaining a uniform image. Currently, the value of the brand depends substantially on its image and its presence in the media, so the franchisor will establish a clause -eventually- that will establish which are the parameters within which the advertising actions will be managed. which will be your sole responsibility and which will be borne by the franchisee.
There are option clauses for the franchisee, such as the option of new territory. By this agreement, the franchisor reserves a territory for a certain time that allows the franchisee, if he makes the option, to expand his territory. In general, it is agreed that if the franchisee makes use of his "right of option", a contract will be concluded under the same conditions as the one that binds them.
A variant of this clause is that of "Franchisee's post-disaster zone reserve"; For situations that due to unforeseeable circumstances or force majeure, the franchisee is unable to use its facilities for the execution of the franchised business, a period is established so that after the termination of the impossibility, it enables them and restarts the business. After that period there is a legitimate cause for termination that authorizes the franchisor to seek another franchisee.
A clause of "Prohibition of storing things foreign to the franchise" can be established. The franchisor assumes the obligation to allocate all the facilities, intended for the development of the franchise, only for the fulfillment of this, and therefore it will not be able to enter its deposits, or the premises, other elements that are not necessary for the development of the business.
The clause "Selection of personnel by predetermined consultant" can also be agreed. Here the personnel that the franchisee has to hire for the fulfillment of the franchise will be selected by the company that defines the franchisor. Other times only the specific profile of the personnel is established and the franchisee must select the personnel according to these specifications.
The power to sub-franchise can be established. This implies that in this case the franchisee will occupy the position of the franchisor in that territory, and will have the same obligations towards the sub-franchisees that the owner has with him.
Naturally, limits are established to this power and the responsibility of the -now main franchisee- is agreed, with respect to the acts of the sub-franchisees, especially those that may harm the franchisor.
Another eventual clause is the so-called obligation to act pro-franchise by penalizing contrary acts. It is agreed that the acts of the franchisee, carried out in relation to the franchise, whether in its relationship with suppliers or clients, or any third party, must be carried out diligently, and with the aim of enhancing the business. In the event that the franchisee, in any way harms the prestige of the business by action or omission, he must pay a certain amount of money as a penalty.
In the same way, there may be a clause that establishes certain elements to implement, in order to enhance the business, called clause
to give prestige to the franchise. We have already said that all acts by the franchisee must be executed diligently.
For example, the franchisee may be responsible for having a mailbox in his premises, to collect complaints and suggestions from customers; only the franchisor accesses the content of the mailbox and here, taking knowledge of irregularities or deviations in the execution of the franchise, he can demand corrections or execute the penal clause.
We must take into account in the study of Franchising, which has in its modality and instrumentation, a very important weight the considerations that the parties, -franchisor-franchisee- make in relation to the legal and tax aspects of the different areas. This leads to clauses such as:
"The obligation to establish a legal entity, to exploit a franchise", which is why it is established that the franchisee, for example, will become a company with certain characteristics (SRL; SA; etc.).
That the Company's Board of Directors must comply with a certain integration, for example that its members have a certain amount of participation in the company. That the premises where the various units of the network are installed are owned by the company.
Other times, clauses related to Taxation are agreed, for example the franchisee, denounces their registration numbers in the tax or social security inspection bodies, periodic records that such registrations are in force and that they are up to date with payments, etc…
The clause of "Use of a conformed invoice to document supplies from the franchisor" is also possible for inclusion in the Franchising, and is the establishment of the use of an invoice system in the elements that the franchisor supplies to the franchisee. The instruments that document (invoice) the obligations contracted by the recipient (franchisee), will be authenticated and recorded by autograph signature. After conforming, the document is sent to the franchisor with the proof of merchandise received in accordance. This clause is important in countries such as Uruguay or Argentina where, by express legal provisions, duly formed invoices are executive titles.
Finally, as an example of contractual clauses, we point out those that establish prohibitions of any type of link that may imply joint responsibilities for the franchisor, be they tax, labor or commercial.
It is agreed promptly that neither the franchisor institutionally, nor its dependents, may have links in the activity of the franchisee or its personnel; the franchisor's right of supervision is limited to controlling the faithful compliance with the terms agreed in the franchise.
The franchisor cannot exercise the direction of the actions of the franchisee, who is an independent and autonomous entrepreneur, who carries out his own undertaking under his responsibility and risk.
If the supervisors of the franchisor exceed themselves and intend to interfere in the management of the franchisee's business, the latter has the obligation to reject their actions and notify the franchisor, to provide for the cessation of such violation to their sphere of autonomy.
It is specifically established that the parties declare that no type of subcontracting will be carried out between the franchisor and the franchisee, to complement the Franchising contract. Any type of technical unit of execution between the contracting parties, or links that may constitute an economic unit, is discarded.
The aim here is to eliminate all types of solidarity before tax inspection bodies or for labor claims.
4. Franchising Modalities
The doctrine that Franchising has studied, in its vertiginous contemporary development, has distinguished various Franchising modalities, and has tested different qualifications, here we only refer to the majority accepted distinction that coincides with the Traditional Franchising modalities. We must bear in mind that this contract has been adopted by companies to increase their distribution network or marketing of products or services, therefore, the development of this type of business ventures, go beyond the territorial limits of a country and settle in various parts of the world.
It will depend on the inflection and accent that the grantor makes, in the various instrumental aspects of the implementation of the agreement, which will raise various issues of a legal, financial, tax, operational nature, etc.
First we will describe what has been called Direct Franchising. This is the case of an owner who intends to develop his business in other countries, different from his residence, or where he has developed his company, but without setting up through branches. To avoid expenses and maximize profits, the owner -future franchisor- will grant in those countries in which it intends to market its goods or services, a commercial franchise to those who wish to develop the business under their responsibility and risk. The franchisor agrees the terms of the commercial franchise, with the local franchisee, to whom it provides all the necessary elements for the development of the venture, and will receive as payment -generally- a sum for the franchisee's entry into the network, and then what we have previously referred to as royalties.
Within the Direct Franchising modality, which we have described, it is distinguished in turn, a) Development Franchise and b) Main Franchise or «Master Franchise».
a) Development Franchise
In this modality, the holder grants the franchise, with the exclusivity note on a certain geographical area, which may be a country for example. But this franchisee is obliged to install in that territory, a certain number of units for the development of the business, but these must be his, he must install each and every one of the units at his risk and responsibility.
The franchisor receives from the franchisee a sum for each branch, for example -combined- with a differential price according to the pace of enabling units to be started, etc. Other times the payment that the franchisee must make will be a percentage of sales, either per unit or for the total, here there may also be a very diverse range as it can also be agreed that the percentage for the payment may be lower as it increases or goes beyond certain levels.
There may also be a combination of lump sum payment and a percentage.
b) Main franchise
It is the most used modality for cases of international commercial franchise. In this mode, the owner grants the franchisee the exclusive privilege of sub-franchising and installing their own units within a certain territory.
It is worth mentioning that here the franchisee, unlike the development franchise, can enable its own units to exploit the franchise, but can also grant other sub-franchises. As can be seen the main franchisee in the established area acquires the position of the franchisor; Consequently, it assumes all the obligations of this before its sub-franchisees, in the first place it must establish in its territory a network of franchisees to whom it will have to transmit the Know-How of the business, train them, permanently supervise them, etc.
The formulas that can be used to pay the owner or the main franchisee, deserve the same considerations as the previous case. But - we add - we must remember that in all cases the tax legislation of each country will play a decisive role.
Second, we will see the subsidiary Franchise.
In this modality, the owner establishes a subsidiary outside the country of residence or foundation, of the primary business, in order for it to grant franchises in that territory. With this mechanism, the advantage is obtained -with respect to the direct franchise- that the owner is present in the franchised territory, with which he can have greater control of the development of the enterprise and a greater degree of intervention in the network, providing services to the new units, or provide inputs in an identical way to the local ones, etc.
Another modality to implement Franchising is the Joint Venture. Joint Venture is understood as the association of several people to promote a commercial company jointly, in order to obtain profits.
Sometimes it can be more attractive for the owner, to enter into a Joint Venture agreement with a resident. This Joint Venture is awarded a - »Master Franchise» -, it is designated the Main Franchisor, and this new entity is in charge of developing the business within the territory, implementing the creation of the franchisee network (in reality they will be sub-franchisees).
It will also be decisive to adopt this modality, the local legislation relative to this type of organizations.
Legal Nature of Franchising
As is well known, there is no legislation in Uruguay that refers to Franchising. The world reality is similar, except for some rules of the European Economic Community. Therefore it has been the doctrine and jurisprudence, which in one case has been investigated and in the other it has had to interpret the law to resolve specific issues.
The doctrine in France maintains that franchising is a type of concession, for the French we would be facing a type of concession contract, which has been called in a different way, but that in fact, we are facing a concession.
These authors believe that we are dealing with a concessionaire grouping technique, distinguishing itself from the classic concession, that in this case the concessionaire must pay a price for entering the grouping and then royalties, aspects that never appear in the traditional concession.
They characterize Franchising as a commercial license, it would be a trademark concession, in which the grantor is also obliged to provide the concessionaire together with the right to use the trademark, all the complementary elements to market the good or service.
We consider the figure of the concession insufficient to cover the Franchising contract, such and with the characteristics and elements that we have described in this work. Therefore, to banish its assimilation to the concession, let's say that, granting the use of the brand and symbols, in exchange for the payment of a sum of money, and then paying royalties to the grantor or holder, who also undertakes to transfer all the Know How of your business, to transfer all the necessary elements so that the franchisee reproduces the franchisor's business. It makes them very different. It can easily be seen that these are two completely different contracts in many basic respects.
Other authors have tried to identify Franchising with the supply contract, especially some Italian authors, by virtue of the fact that in that country the Civil Code regulates the so-called supply contract, as "the contract by which a party is bound by compensation of a price, to be executed in favor of another, periodic or continuous provision of things ».
The main function for the supplier is the certainty in the previously known placement of a quantity of products; and for the supplied, the security that it will be supplied continuously and assured in its needs of the referred product.
The classic supply contract is the example of supplying electricity, or gas; and in the case of companies, it is the need to ensure the cleanliness of the premises, the repair of machines, or raw materials, which are the services that constitute the object of the supply contract.
We also rule out the assimilation of Franchising with this contract, since the supplier does not grant the supplier the use of the brand, does not transfer a production method or for the provision of a service, there is no supervision of the franchisor, nor a special interest in the product or service that the franchisee obtains to market.
Obviously we are facing two very different contractual forms. In any case, we must conclude that as it is not expressly legislated, we are facing an atypical and unnamed contract, based on the fact that its existence, form, content and effects have not been foreseen by the legislator. From the point of view of the Civil Code, we are facing a commutative, consensual, bilateral, onerous agreement, of continuous execution. The applicable provisions are those relating to the general principles that govern contracts and the provisions that the parties agree to in the convention within the limits of the autonomy of the will.
5. The Parts Of Franchising
As it arises from the previous lines, we have called the franchisor, the owner of the brand and the original business, that is, the one that develops a successful commercial experience for itself.
And we have called -in this work-franchisee, the subject who acquires from the first, the authorization to develop, under his risk and responsibility, a business with identical characteristics, using the same brand and proceeding in the elaboration of goods or provision of services with identical, methods, techniques and supplies that the owner.
Franchisor
The franchisor through the agreement that gives rise to the Franchising relationship, assumes a series of duties and acquires a counterpart of rights.
In principle, it grants authorization to the franchisee, to the use of its brand and symbol, which are elements known to the potential consumer public, as a result of a development of the marketing of the business, through communication media that have made them known and recognizable. It also assumes the obligation to transfer the Know-How of the business to the franchisee, train it, etc., and monitor that the goods or services that it sells, meet the quality and presentation that uniformly distinguish the products or services that are the object of the franchise.. This implies that the franchisor must transmit clear and precise methods and models, and take care of a strict application throughout the entire network. For this, it must develop supervision and control systems.
Many times the franchisor is obliged to finance or co-finance with the franchisee prior market studies, in order to determine with some precision the most suitable place, and sufficient infrastructure, to install the new franchised unit, it can also assume obligations such as provide financial support for the installation, or manage credits and provide guarantees, it may be obliged to provide the franchisee with administration or accounting systems, and even external audits for both financial and accounting aspects, as well as efficiency and quality in business management.
Generally, the franchisor is interested in supplying computer programs for the control of marketing, billing and collection; for the measurement of production and stock control; manuals for product packaging or display, etc.
Naturally, the franchisor obtains through the Franchising agreement a compensation of rights or benefits.
To begin, it obtains, through the authorization of new units that develop the business, new points of commercialization, without assuming new capital investments and the consequent risk with the new undertaking. You benefit from the expansion of the presence of your brand and symbols, with the effort of the franchisee, who will try to make it known and prestigious, and on top of that, it will charge for having granted its use.
It optimizes its benefits for each commercialization, since it obtains profits for them without having to assume the cost of it, either in premises, personnel and administration, etc. In the same way when there is not an important flow of sales, no it has fixed costs to finance. If the franchisee's venture fails, he may choose to acquire the unit from him and manage it directly, or operate it through a new franchisee. It notably improves its presence in the market through a network of franchisees and benefits from the marketing carried out by the franchisee at its own cost.
The franchisee
For its part, the franchisee comes to assume the counterpart of the benefits and obligations assumed by the franchisor.
In the first place, the franchisee must face the implantation of the new venture, being in charge of the capital investment, acquiring in some cases local, providing its accommodation and decoration, or machinery, etc. He has to pay the franchisor for entering the network, and be subject to the instructions of the owner, in everything related to the production of goods or provision of the services subject to the Franchise.
Obviously, despite all these charges, the franchisee obtains numerous benefits, although he generates his own business under his risk and responsibility, he also obtains certain assurances or certainties of the possibility of success of his venture, since he is facing the development of a business which has already been successful, in the experience of the owner. On the other hand, the enterprise enjoys an already established prestige, and benefits from the knowledge of the brand and its symbols, and from the use of a methodology and a system already proven in its functionality. The costs of errors and adjustments that every new venture generates are avoided. And there is also a certain public that consumes or wants to consume an already known product or service, what is commercially called a captive public.All the authors highlight this aspect of Franchising as an essential element that defines the contractual type. And it is that in our economic reality, the risks of failure, of any undertaking implies very high costs; in the case of the franchisee, it has the advantage of having a path already traveled by the grantor, and it does not pay any improvisation costs -the well-known right of floor- that have already been corrected and overcome. Needless to say, about the advantages it obtains from the developments carried out by the grantor in terms of product or service marketing.in the case of the franchisee, it has the advantage of having a path already traveled by the grantor, and it does not pay any improvisation costs -the well-known right of floor- that have already been corrected and overcome. Needless to say, about the advantages it obtains from the developments carried out by the grantor in terms of product or service marketing.in the case of the franchisee, it has the advantage of having a path already traveled by the grantor, and it does not pay any improvisation costs -the well-known right of floor- that have already been corrected and overcome. Needless to say, about the advantages it obtains from the developments carried out by the grantor in terms of product or service marketing.
For all these reasons - say the scholars of the subject - it is that the franchisee is willing to pay very important sums for their entry into the network, despite the fact that they must also pay royalties periodically and remain supervised, assisted and controlled in the development of their company, even in the smallest details (accounting, marketing, personnel, etc.), will feel the presence of the franchisor. The franchisee may still be subject to acquiring regular supplies or supplies from the grantor, or obtaining their consent to acquire them from third party suppliers.
The franchisee may have to admit efficiency audits, or quality controls, by the grantor. For our part, we believe that all these controls, permanent supervision, efficiency control, quality control, supply of inputs, etc., carried out by the franchisor is what makes the new unit an identical copy and therefore has a successful operation, which means a new benefit for the franchisee.
6. Assignment In Franchising
It is usual that in the Franchising contract, the franchisor establishes the prohibition of assignment by the franchisee, in this case no major difficulties would arise, since the parties have in some way foreseen such possibility. But there are two issues that have generated litigation, in attention, first that because it is an adhesion contract, there is an imposition by the grantor of the franchise, of this type of clauses, and others of the same nature.
In principle, these clauses are valid and unless it is proven that the will of the franchisee has been subjugated, such stipulation is not illegal and is located within the elements that the parties can agree to within the limits of the autonomy of the will.
The second question on which we will briefly stop is relative to the "intuito personae" contract characteristic that we had granted to Franchising. The problem arises in the event of the death of the franchisee. We believe that the franchisor at the time of entering into the contract has especially taken into account the personal, professional, commercial qualities, etc., of the franchisee, so we consider it prudent to establish contractual clauses prohibiting the assignment or transfer of the Franchise. Or establish mechanisms for the assignment where it reserves the right to accept it or not, depending on the interpretation that the future franchisee is reliable.
The doctrine mainly understands that all these clauses are legal and admissible, and that they are of restrictive interpretation.
Termination of the Franchising Contract
When referring to the legal nature of Franchising, we point out that there were no legal provisions that contemplated such contractual type.
Consequently, the general provisions relating to contracts will be applicable, and within such regulatory parameters it will be necessary to establish the causes that the parties may invoke for their termination.
Fundamentally, there are in almost all contracts, the establishment of a certain number of causes that would give sufficient reason to promote its termination; and when they are not foreseen, situations such as breach of contract will be sufficient reason; the bad faith action of some of the contracting parties that harms the other party; also the assumption of omission and negligence in the development of the franchise; a misconduct that can be classified as serious, fraud, bankruptcy or bankruptcy.
Although in this it can be peacefully admitted that the grounds for requiring termination are clear and delimited with some precision, two fundamental issues arise. For some authors who understand that the norms provided for the concession and distribution must be applied, the solutions that the law, doctrine and jurisprudence have designed will then be taken into account.
For those of us who think that such solutions are not applicable because it is a contract with clearly different essential elements, these provisions - of concession and distribution - cannot be applied automatically, as if they were identical conventions. And it would be necessary to comply with the general provisions established for contracts.
If the Franchising agreement was made without a term, and the parties - either of the two - decide to conclude it, taking into account that the term is indefinite and by virtue of contractual powers, and they do so without expression of cause, in this case it should be pay compensation.
We understand that although the unilateral recess was established in the agreement, the parties must act in good faith, and in each specific case the decision maker must analyze whether there has been an abuse of rights.
In any case, there are several things to solve after accepting that there are a series of causes that give sufficient reason to promote the termination of the contract.
One of them is related to the possibility of the rescinded, to claim compensation.
In general terms, the jurisprudence has accepted the request for compensation, when the termination occurs unexpectedly, without prior notice, or when the time between it and the termination of the link is very short.
Usually the notice period that is considered reasonable is six months, in order to facilitate the counterparty to take measures and face actions aimed at minimizing the damage.
In some laws, and generally in the case of the distribution contract, having omitted the notice generates responsibility for the damages caused.
Another issue that arises in cases of termination of the contract, due to its termination, is whether the franchisee can claim compensation for clients. This is a difficult situation to resolve because, as can be seen, in the franchising network the clientele is identified with the franchisor, the franchisee and the rest of these or sub-franchisees; It seems clear that the clientele, it is, of a certain brand, the customer chooses a brand based on its prestige or characteristics, this is the decisive element for the buyer. We do not believe that customers choose such a brand, based on recognizing certain particular qualities of the franchisee. This is the most common example.
Now, if the case to be solved was reversed and it was a franchisee who has developed a product or service in an area, until then unknown, investing in brand marketing and generating an image of quality and prestige for that brand; In this case, yes, the franchisee is entitled to compensation, by clientele, because in that case there is no doubt that it was he who generated it.
Franchising and Industrial Property
We have pointed out as a typical, -essential- component of Franchising, that the franchisor must authorize the franchisee to develop a business that pretends to be a true copy of its business. Therefore, there is a trademark owner who grants the franchisee the right to use it, its symbols, and - depending on the case - invention patents. Therefore, the Franchising contract includes the authorization for the use of the trademark, symbols and other elements related to industrial property such as patents.
1. About invention patents
The regulations of the region, relative to the property and exclusive rights regarding trademarks and patents, establish a registration system for their protection.
In Uruguay there are two fundamental norms regarding invention patents, Law No. 10,089 (of 12/12/41) and its regulatory decree of September 4, 1942.
Regarding international treaties, although they have not been ratified by our country, we point out:
- "PCT" Patent Cooperation Treaty of June 19, 1970;
- Strasbourg Agreement Concerning the International Patent Classification of March 24, 1971;
- Budapest Treaty, of April 28, 1977, on the international recognition of the deposit of microorganisms for the purposes of patent procedure.
And as a treaty - it has been ratified - the Treaty on Invention Patents signed at the First Congress of Private International Law, in Montevideo (1888-1889), ratified by Argentina, Bolivia, Paraguay, Peru.
Our law establishes three types of patents, the ordinary patent, for a single and non-extendable term of fifteen years; second, patent of improvement for the cases of improvement of an invention, term fifteen years; third, revalidation patent, requiring certain conditions, for example in the case of foreign patents that are not being exploited in the country, the term is fifteen years.
In Uruguay, the inventor's rights are protected by the National Constitution, which establishes that the law must recognize and protect the inventor's work, moral right, personalism, inalienable and imprescriptible; but to enforce such rights, it is necessary to register in the Registry, granting a patent title.
The inventor who does not patent cannot invoke legal privileges, have exclusivity in the exploitation of his invention, or prevent others from exploiting his invention. Even without patenting the inventor, he can be recognized as the author of the invention -inalienable and imprescriptible right-, which passes to his heirs, he can exploit his invention, he can carry out the patenting process and also oppose others to patent it.
But when the inventor patents his discoveries, he can not only exploit the invention for his benefit - although subject to terms and conditions - but he can also grant an exploitation license to a third party, transfer the ownership of the patent by inheritance, legacy or act between alive. Obviously you can also deduct civil and criminal actions against third parties who defraud the rights granted by the respective title.
Our law enables procedures to transfer the patent.
a) Transfer of ownership.
The ownership of the patent can be transferred by inheritance, legacy or act between living. It can be total or partial, but in the latter case, the respective annuities must be paid to the holder, unless expressly agreed otherwise.
The transfer is a formal act that must be documented and recorded. First, if the transfer contract is made in Uruguay, even with a private instrument, with certified signatures; but if it is carried out outside the country, the agreement must be made in a public document. Second, it must be registered, which implies its registration in the Industrial Property Registry.
There is also the possibility of transferring the right of exploitation. In this situation, the patent owner does not relinquish ownership of it, but grants the right to exploit it or grants an exploitation license, which may be total or partial, with a term or under conditions that are agreed. The concession or exploitation license agreement is a formal act for which the same requirements that we detail for the transfer apply.
The Assignment can be made exclusively, and in this case the licensee or assignee, acquires the same rights as the owner, unless otherwise agreed; If it is not exclusive, it is the owner who retains the power to exercise the actions granted by law.
The concession or exploitation license agreement are formal acts; licenses are considered personal and non-transferable, unless expressly agreed otherwise.
Although the law grants the same treatment to the assignment and the license, we are dealing with different legal acts; the assignment implies a transfer of the rights of the patented to the assignee, for the exploitation of the invention; The license is an authorization granted by the owner of the patent to the licensee to exploit the invention.
2. On trademarks or trademarks and service marks
The trademark or trademark is a sign that distinguishes the products of a manufacturer or trade, from the products manufactured or marketed by others; The same can be said of the service mark, where it serves to distinguish the services provided by various entrepreneurs.
As a brand concept, let's say that it is a visible sign that allows one to distinguish the goods and services of a company from the goods and services of other companies, in the case of an intangible good, whose main value lies in the reputation and prestige it represents.
The characteristic features of the brand are the evocation of origin, identification and distinction; they attract and preserve the loyalty of customers with certain products and services.
In our time, the brand plays a distinctive role and all legislation is inspired by this differentiating role. The advertising function of the brand is essential, either to promote the brand among the public, generating attraction towards it; either to generate confidence in the product or service that is identified with the brand: as a guarantee of quality or support, for consumer protection. Obviously the most visible function of the brand is its competitive role and identification of the product or service for the consumer.
The legislation in our country, referring to the trademark, also establishes a registration system.
In Uruguay, the norms regarding trademark legislation are: Law No. 9,956 of October 4, 1940, on trademarks, trademarks and agriculture; Regulatory Decree of the Law on Trademarks, Trade and Agriculture, of November 29, 1940; Decree 649/967, on Service Marks, Decree 340/983 of September 2, 1983, which declares mandatory the use of the "International Classification of Products and Services" resulting from the Nice Agreement Resolution (sIN0) of the Directorate of the Industrial Property of January 13, 1984, which makes the use of the "International Classification of Products and Services" enforceable and approves the "Table of Concordances".
The Paris Convention for the Protection of Industrial Property of March 19, 1883, ratified by our country.
The International Classification of Trademarks for products and services resulting from the Nice Agreement by Decree 340/983 of September 2, 1983 and Resolution (s / N0) of January 13, 1984 are also applicable.
It is worth mentioning that the Treaty on Trademarks and Trademarks signed in the First South American Congress of Private International Law in Montevideo (1888-1889), ratified by Argentina, Bolivia, Paraguay, Peru, in addition to our country, also governs Uruguay..
There are other international standards but not ratified by our country:
- Protocol on the Madrid Agreement on the International Registration of Marks, adopted on June 27, 1989.
- Madrid Agreement, of April 14, 1891, relative to the International Registration of Marks;
- Treaty Relative to the Registration of Trademarks, of June 12, 1973;
- Vienna Agreement of June 12, 1973, establishing an International Classification of the figurative elements of trademarks.
When the businessman registers the trademark, a series of rights arise for him: a) it is presumed by law that whoever registers the trademark is its owner; b) It confers the right to use the brand exclusively, with the exception of the causes established by law, c) The right to transmit the brand is also acquired (by contract or will); d) the right is acquired to exercise the trademark actions provided for by law.
We believe that it is appropriate to establish that these referred rights are in relation to the products or services for which it was requested. This means that there may be two identical trademarks, but to distinguish different products, since it is understood that in these cases there can be no confusion because they are different products or services. Confusion could only be possible if they were similar. Therefore, when the registration application is made, it is established to which class or classes of articles the trademark refers or intends to identify, for this there is the Classification established in Nice, known as "Nice Arrangement", in use in Uruguay since 1984 inescapably.
There are only two exceptions to the above. One, when you try to register a well-known trademark, you try to prevent someone from taking advantage of the reputation and large advertising expenses made by others.
And two, when it comes to registering similar products or services but that are in different classes, and that can generate confusion.
The ownership of the trademark can be transferred by act between living, first individually when the transfer of the trademark is expressly agreed, and secondly, when an industrial or commercial establishment is sold by the trademark owner, that is to say that the alienation of the establishment includes the transfer of the brand, unless expressly agreed otherwise.
For the transfer of the trademark to be enforceable against third parties, it must be registered in the Register of the National Directorate of Industrial Property, and may be recorded in a public or private document.
3. About the trade name
It is possible that the name of the merchant or industrialist coincide with the commercial name and in this case the name of the merchant also serves to identify the establishment. And this happens sometimes. In general, the establishment is individualized with another different denomination known as the commercial name, and as such has a patrimonial nature, it is in trade, its economic value can be established and it is negotiable.
In Uruguay, Law No. 9,956 has referred to the trade name, including it in the protection of industrial property. The legislator has established that the name of the merchant, company name (company name), trade name, the banner or label of the establishment, constitutes industrial property.
For all this, what refers to the legal protection of the trademark is applicable, a very important difference is that the trade name cannot be registered, and the rights granted by law can still be exercised.
The owner can transfer the use of the business name, and does so if he transfers the establishment; It is not so clear whether you can transfer the trade name independent of the transfer of trade or industry.
From the foregoing, it is clear that there is a right to the exclusive use of the commercial name, which ends with the closure or disappearance of the establishment. In this case, use is the essential element to maintain this right, which arises with use, there are no possibilities of registration, and therefore is maintained by use and when use ceases, the reason for the protection of the law disappears and of the Paris Convention for the Protection of Industrial Property.
4. Conclusions
As we said, the Franchising contract implies the authorization of the franchisor to the franchisee, to reproduce their business, consequently there is in the agreement an agreement by which a license is granted to exploit a patent, or a trademark, or a commercial name where appropriate.
Franchising, this is its distinctive novelty, is a method of operating a business, which implies a complex range of issues integrated into it, which will include the corresponding licenses, patent, trademark or trade name. It is an essential element of the contract, and it means that the franchisor is the owner of a patent or a registered and successful trademark, in most cases it is also well known.
For all that we have indicated, there is in the agreement a patent license, trademark, etc., and this generates in the contract some provisions that are created for the franchisee, for example, the right to use the trademark in your business, the right of the franchisee to request compensation for infringements of patent or trademark laws; the duty of the franchisee to use the trademark or patent correctly, within the limits and conditions imposed, having to place logos and posters of certain characteristics to identify their company, etc.
The source of the data handled is the classic book «Industrial property in Uruguay», by Prof. Siegbert Rippe, FCU, 1992.
7. Franchising And Consumers
It is easy to see that consumer protection has been a new element recently integrated into our legislation, although with different antecedents in comparative legislation.
It has become repetitive to resort to the antecedent of Spanish legislation to define or conceptualize various aspects of consumer defense, so we will resort to the General Law for the Defense of Consumers and Users, sanctioned in Spain in 1984 and which defines as a consumer the one who acquires, uses or enjoys goods or services as the final recipient thereof.
Regarding the consumer, we consider it pertinent to adopt a broad criterion, including in such a condition all those who may directly or indirectly be affected as consumers. At first it is possible to argue that consumer protection aimed to restore the balance between the consumer and between suppliers and manufacturers, located in our consumer society in a predominant situation. But in the current development of all protection regulations, the individual is taking on greater prominence and presence, who is permanently overwhelmed by the practice of the market where prices and conditions are imposed.
Along with the development of national and international legislation, a large number of consumer groups have been developed, in consumer defense associations and leagues, in order to protect the interests of the consumer and confront abuse by distributors and manufacturers.
We have already defined the concept of the Franchising contract, where it was established that the franchisor will supply the franchisee with the operating method, instruments and techniques to reproduce a business.
Therefore, there is often the obligation of the franchisee to manufacture products according to patents, technical standards and precise instructions of the
franchisor, it will be very important for him to be very clear about the legislation of the country, the uses and customs of the territory where the franchise will be installed, in order to bear in mind the allocation of responsibilities. It is easy to understand that there is a double face or sense of responsibility in the Franchising contract, one related to the franchisor and the franchisee, and another to third parties, consumers and third parties that are linked to the business, such as suppliers.
In this sense, what is established by the laws regarding liability towards third parties, for the products marketed or produced under license from the franchisor, or for the services provided with the brand and symbols thereof, are fundamental elements for this type of contract.
For the franchisor, it will be crucial to know if in a given territory it can be held responsible for the products manufactured, marketed or for the services provided by the franchisee, what is the insurance regime and guarantees or tax provisions. The central question to be resolved is whether a consumer, in the event of suffering damages due to the benefits of the franchisee, or having been affected by deficit products supplied; or by acts or omissions of the franchisee, it can go against the franchisor.
And this is very important because the franchisee acts, under the name, using the franchisor's patent and trademark, symbols and distinctive, and the consumer goes to such premises, buys or uses such services, given the appearance and certainty that it is an establishment of the franchisor. There is an appearance that the person providing the service is the owner.
In Uruguayan legislation, the relationship between franchisor and franchisee is contractual and the rules of contractual liability established by the Civil Code will apply there.
As for consumers, the responsibility of the franchisee is contractual because it arises from a business event of supply of goods or provision of services. The responsibility of the franchisor is not so clear a priori since it may be responsibility for manufacturing defects, design flaws, defects in the instructions for use that accompany the product, etc.; will have to be analyzed in each specific case. But what is undoubted is that the consumer must first make effective the responsibility of the franchisee who is with whom he contracted. Then you can appeal to the franchisor, or even directly and first, but for very specific reasons such as those exemplified.
8. Franchising contract model
Agreement: Between a person (natural; legal)… domiciled in…, represented by…, in his capacity as…, according to… (statute; social contract; mandate; etc.), on the one hand, hereinafter referred to as the "Franchisor" and the person… (natural; legal)…, domiciled in…, represented by… in its capacity as…, according to… (statute; social contract; mandate; etc.), on the other party, hereinafter referred to as "Franchisee", is celebrated this Franchising Agreement, according to the following stipulations:
FIRST: Definition (the Franchise) The parties declare that they will conventionally denominate Franchise, the right to use… (brand; designation; model; design), together with the obligation to provide assistance and advice… (technical, design, decoration; in maintenance; for authorization; for operation; on commercialization; for elaboration; for fractionation; on production; promotion; for presentation; on business image; for accounting; on computerization; for the training of files; in hygiene and security; in human relations; in services; on customer service, etc.), which the franchisor will provide to the franchisee.
SECOND: (Purpose) By this contract, the franchisor is obliged to give the franchisee a franchise, who accepts it and will compensate, granting rights and assuming obligations in favor of the former.
THIRD (Improvement of the Object) The franchisor will give the franchise with limitations and charges, which the Franchisee must strictly comply with, in order to perfect this contract.
FOURTH: 1. The purpose or destination of the Franchise will be for the franchisee to exclusively develop the activity… (production and / or commercialization of certain goods and / or services).
2. The franchisee may not perform any other act with the Franchise, other than those specifically authorized in this contract.
3. Failure to comply with this clause, will lead to the Franchisee, pecuniary penalties in favor of the Franchisor, which consists of…
FIFTH (Territory)
1. The franchisor assigns an exclusive zone delimited by… (geographical area), so that the franchisee can carry out his activities with the franchisee and may not use it outside of it.
2. This obligation is reciprocal, since the franchisor may not give a Franchise to third parties, within the exclusive area of the Franchisee.
SIXTH (Business premises)
1. The franchisee must have within his zone, within the maximum term
of… months, as… (borrower; tenant; usufructuary; owner;…), for a perfect title, which ensures disposition for a minimum period of… years, real estate, in the amount of… units, of the type and specifications…, which must… (enable, equip, install, remodel, recycle, decorate,…), at your expense, complying with the general specifications, within a maximum period of… months, according to Annex…
2. The franchisor must pre-approve in successive acts, the commercial premises, the work plan, the end of the work and the start-up.
3. The approval, rejection or objections, the franchisor must carry out individually within… days of notification, otherwise, the stage will be considered approved.
SEVENTH: (The works) For the project of adaptation or recycling, spare parts and decoration (of / the commercial premises / s), the franchisor will give advice, at his own expense, through…
EIGHTH: (Exclusivity of the premises) The franchisee will have an absolute obligation of exclusivity, with (his / her commercial premises / s) and may not develop other activities in them, outside the purpose of the franchise.
NINTH: (Incertability) The Franchise shall be inedible by the franchisee for any form or act, whether partial or total, temporary or permanent, free or onerous.
TENTH (Term)
1. The term of the Franchise will be…, years, from… (act; date) and will expire on…
2. Upon expiration of the franchisee term, you must cease to use everything that this franchise has granted you.
3. For the dismantling and removal of the… (posters; inscriptions;) interior and exterior of… (your business premises / s) that link you to the Franchise, the franchisee will have a maximum term of….days
4. In case of breach of its obligations, the franchisee will be fined, with a daily Penalty Clause, in favor of the franchisor of…
5. This penalty will be generated cumulatively, singularly for each case separately.
6. The franchisor reserves the rights to litigate, for all the actions that the law would mark, grant against the franchisee.
ELEVENTH (Automatic Extension) The term of this contract will be automatically extended, for periods of… (months; years), if neither party manifests its contrary will, with a personification of…, days, at the expiration of the original term or the extensions.
TWELFTH (Right of registration)
1. The franchisee pays in this act to the franchisor as "Subscription Right" for the reservation of the Franchise and the simple signing of this contract, the… (the sum of pesos… ($) of which this instrument represents effective receipt.
2. This sum of money passes into property to the franchisor and may not be attributed to any debt of the franchisee, even if this contract is subsequently terminated, without the latter receiving other consideration.
THIRTEENTH (Price)
1. The price that the franchisee must pay to the franchisor. as consideration for the Franchise obligation, it will be made up of the following items:
a) The… (the sum of pesos… $). resettable according to the IPC for each authorized commercial premises;
b) A percentage right, on the gross amount of sales, of… (…) percent, excluding direct taxes and VAT.
2. The settlements and payments of both items must be made by the franchisee within… days of the expiration of each month.
3. The lack of settlement and / or payment on time, will generate compensatory interest of (…) percent and a punitive interest of (…) percent.
4. A delay of more than… days will give the right of automatic termination in favor of the franchisor.
FOURTEENTH (Payment)
1. All payments that the franchisee is obliged to make to the franchisor must be deposited, in cash, in the current account N0… open to the order of… at the Bank… branch…, or where the latter notifies in the future.
2. Deposits by check will not be considered as payment until their effective accreditation.
FIFTEENTH (Use of Bank Account Account)
1. The franchisee will be obliged to enter all his collections, whether in cash or checks, in bank checking accounts, which by his choice, he will open in banks…
2. If you change banks, you must notify the franchisor.
SIXTEENTH (Audits)
1. The franchisor will have the right, by himself or by third party auditors, to review and control the accounting and documentation of the franchisee.
2. It will include the review of invoices, remittances, bank statements, account statements.
3. This list should not be construed as exhaustive.
SEVENTEENTH (Compliance with third parties).
1. The franchisee will be obliged to strictly comply with its obligations, whether with the franchisee or with third parties.
2. Failure to comply with the obligations of the Franchisee with third parties, whose link is linked to the purpose of the Franchise and in general to this contract, will entitle the franchisor to collect the rights accrued and special criminal clauses, terminate this contract, without compensation some for the franchisee.
EIGHTEENTH (Compliance with regulations) The franchisee must comply with the purpose of the Franchise without violating municipal or national regulations, be they health and safety, labor, social security, commercial, banking, tax and in general all those that govern their activity, since This list should not be interpreted exhaustively.
NINETEENTH (Prices)
1. The franchisee must respect the general sales prices, according to the Franchisor's Price List.
2. Discounts or discounts will be prohibited, except in the case of general promotions with franchisees from other areas.
TWENTIETH (Credit cards)
1. The franchisee will have the right to sell with the Credit Card system of… (American Express; Cabal; Diners, Master, Visa;…).
2. For the computation of gross sales, you may deduct the… (…) Percent of the discount, which for the payment promises remains in favor of these granting entities, for the purposes of the liquidation of the rights of the franchisor on sales.
TWENTY-FIRST (Activities)
1. The franchisee must fulfill the purpose of the Franchise, with the following calendar and operating hours…
2. Failure to comply will lead to the following penalties…
TWENTY-SECOND (Personnel Requirements)
The personnel assigned by the franchisee for the fulfillment of the object of the franchise, must complete in terms of quantity, suitability, exclusivity, training and clothing, the specifications of the Annex…
TWENTY-THIRD (Supervision)
1. The franchisor will have the right to supervise, with his staff, all the franchisee's dependencies, where
perform acts related to the fulfillment of the purpose of the Franchise.
2. The right of supervision will also include dependent personnel.
TWENTY-FOURTH (Inspection) The franchisor will have the right to examine the dependent personnel, inspect the commercial premises, control the… (products, services provided, production and marketing systems, suppliers) of the Franchisee within the operating hours at any time.
TWENTY-FIFTH (training)
1. The franchisor is obliged to dictate training and updating courses on the purpose of the Franchise, free of charge, for the franchisee's personnel, assigned to comply with it within each period… (semi-annual, annual, biennial,…), in the general dates and times that you set.
2. The franchisee will select who will attend and pay their salaries.
TWENTY-SIXTH (Advertising) The franchisee must disseminate advertising promoting the purpose of the Franchise, according to the specifications of the Annex…
TWENTY-SEVENTH (Franchise Promotion)
1. The franchisor must create and disseminate advertising for the institutional promotion of the… (brand; symbols; model, design;…), according to the specific specifications of the Annex…
2. The franchisee must contribute to the payment of this advertising with… (fixed sums, percentages, rights on their sales…)…
TWENTY-EIGHTH (Elements for advertising) It will be the obligation of the franchisor, to deliver the advertising elements… (brochures; samples; posters; prospectuses;…), in the amount…, without charge to the franchisee, in addition to those distributed in general, to all those that in other areas have contracted Franchise.
TWENTY-NINTH (Commercial Stationery) All the stationery that the franchisee uses, among others, letter paper, envelopes, invoices, remittances, brochures, price lists, in order to comply with this Franchise, must be printed in accordance with the specifications of the Annex…
THIRTY (Obligation to insure)
1. The franchisee will be obliged to keep insured, in first level insurance companies, against all risks, including civil liability to third parties, all things that are movable or immovable that must be used, to fulfill the purpose of the Franchise.
2. In all cases, the insured capital must be updated… (monthly; bimonthly; quarterly; biannually) and cover possible claims in their actual amounts.
3. The franchisor will have the right to control this obligation of the franchisee.
4. If it claims the franchisee for fundamentally considering the breach of these obligations and the latter does not comply after the period of… days, the franchisor will have the power to terminate this contract.
THIRTY-FIRST (Termination for breach)
1. Failure to comply with any obligations of an undetermined period, the franchisee, which persists, after the period of… days of questioning whether extra or judicially, will entitle the franchisor to terminate this contract, collect the specific criminal clauses and litigate for damages and damages.
2. For all obligations with a deadline, the delay will be automatic and prior interpellation will be unnecessary.
THIRTY-SECOND (Representation) The franchisor does not give any mandate without or with representation to the franchisee, neither in writing, nor tacit: the latter does not represent the franchisor and cannot perform any act in his name or account.
THIRTY-THIRD (Progression of criminal clauses)
1. All the amounts of the daily penal clauses will be… (du, tri, quadruple) past… continuous days of default.
2. Unpaid penal clauses will accrue a daily interest of…% until effective payment.
THIRTY-FOURTH (Communications)
1. The parties will use as a reliable means of communication, a collated telegram or the simple delivery of an original note and a signed return of a copy, which must be signed by the notified.
2. It will be a reciprocal obligation of the parties to receive notifications.
THIRTY-FIFTH (Notifications) The franchisee must notify the franchisor within… days of all the precautionary measures or judicial notifications that he receives, which are linked to the purpose of the Franchise.
THIRTY-SIXTH (Protocolization) It will be the obligation of the parties to formalize this contract and its annexes, within… days of its execution, before the Notary Public…, domiciled in…
THIRTY-SEVENTH (Termination due to bankruptcy or bankruptcy).
1. In the event of preventive proceedings due to bankruptcy or bankruptcy of the franchisee, this contract will be automatically terminated and the franchisor released to negotiate the Franchise, in the franchisee's area.
2. The franchisor shall retain the right to collect the accrued credits.
THIRTY-EIGHTH (Surety)
1. The commercial company… domiciled in… and Mr… domiciled in…, as representative of the company in his capacity as president, according to the Bylaws, added as Annex.., and in his personal capacity, they constitute commercial guarantors, main payers, resigning to the benefits of exclusion, division and interpellation, of all the obligations of the franchisee derived from this contract.
2. The guarantors affect this bond, in addition to the totality of their assets, the following real estate properties:… the one located in… whose title deeds are added as Annex…
3. The Mr. located in…, according to titles that make up the Annex…
4. The guarantors declare that the properties are not encumbered with real rights, nor constituted as Family Assets and are obliged to keep them free from any limitation and possible judicial execution.
5. Neither will they be able to lease or loan it, for terms greater than… years.
THIRTY-NINTH (Substitution of surety bonds)
1. Any decrease in the assets of the guarantors by more than,.. (…) percent, will entitle the franchisor to request their substitutions or to demand that another one be added to cover the decrease.
2. It will be the obligation of the franchisee to fulfill this obligation within a maximum period of… days.
3. You must also notify the franchisor within… hours, all the facts and acts that involve the guarantors, that may affect, the bond that they constituted.
4. Failure to comply with this clause will entitle the franchisor to terminate this contract while preserving its credits.
FORTY (TAXES) The taxes levied on this contract will be paid by…
FORTY-FIRST (Extrajudicial Costs)
1. If the franchisor should litigate to compel the fulfillment of the franchisee's obligations, whether for rights, fees, penal clauses, damages, repetitions and the franchisee is convicted, he must pay, in addition to the legal costs and imputed the cost of fees extrajudicial proceedings of the franchisor's professional lawyers and attorneys, the minimum sum of (pesos… $) for each main trial or incident that should have been initiated or countered.
2. The extrajudicial fees, if they exceed, must be paid by the franchisor against the presentation of the receipts from the professionals involved.
FORTY SECOND (Jurisdiction)
1. In the case of litigation, the parties shall submit to the jurisdiction of the Courts…, renouncing any other that may correspond to them.
FORTY THIRD (Constitution of domiciles)
For all notifications, whether extra or judicial, derived from this contract, the parties and guarantors constitute the following special addresses… where all those that are sent will be effective.
FORTY FOURTH (Annexes)
1. All the annexes referenced are added to this contract and make it up, whether they are originals, copies or photocopies.
2. Signed by the parties and guarantors in original, they will create all the rights and obligations that arise from their stipulations.
3. If there is any contradiction between the declarations and clauses of this contract and the annexes, those of the first shall prevail.
4. General penalties and obligations include the annexes.
FORTY FIFTH (Signatures and delivery of instruments) They sign… sets of equal copies of the contract, with…, clauses, on… pages and… annexes, on… numbered pages from…, to… and receive them…
FORTY-SIXTH (Place and date of celebration) Held on…, the day…, of the month of… of the year 20…
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