AND WHEREAS the Franchisor grants and confers to the Franchisee the right to operate and make use of its distinguishing intellectual property in connection with its established business known as ________ ;
AND WHEREAS the Franchisee shall make use of the Franchisor's established business format, methods, standards, business expertise, know-how, and goodwill in the operation of the same;
NOW THEREFORE, in consideration of the promises and the mutual covenants contained herein, and for other valuable consideration (the receipt and adequacy of which is hereby acknowledged), the Parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
A. Definitions. The Parties to this Agreement, or any amendment or substitute therefor, agree to the following terms and definitions:
I. "Agreement" means this Franchise Agreement;
II. "Franchised Business" means the business under which this Agreement is subject, and is ________ ;
III. "Franchise Fee" means the fee pursuant to Article 3;
IV. "Geographic Area" means the following location:
ARTICLE 2
AGREEMENT TERM AND RENEWAL
A. Term. The Franchisor hereby grants to the Franchisee the right to franchise ________ for a term running for 5 years .
B. Acceptance. The Franchisee hereto accepts the Franchise and agrees to operate the Franchised Business pursuant to this Agreement.
C. Renewal. The Franchisee may elect to renew the Agreement for an additional term of 5 years upon the prior written approval of the Franchisor. The prior written approval of the Franchisor will be contingent on the Franchisee's ability to pay a readjusted franchise fee with necessary modifications to the premises, including furnishings or renovations, as the case may be, at their sole expense, in order to satisfy the Franchisor's contemporary standards. The Franchisee must clearly state their intention to renew in writing. Written notice to renew this Agreement must be given at least 3 months in advance prior to the end of the original term of this Agreement. The Franchisee must have complied substantially with all provisions of this Agreement or any amendment or successor thereto, and the Franchisee shall provide to the Franchisor a renewal fee of: $ ________ (________). In the event that the prior written approval of the Franchisor is not granted, the Agreement will be deemed to be on a month-to-month basis.
D. Geographic Area. The Franchisee will have the right to operate the franchise only within the defined Geographic Area. The Franchisor agrees not to open or permit the opening of any other franchise within the Geographic Area. During the course of this Agreement, the Franchisor shall not grant or operate themselves, directly or indirectly, the Franchised Business within the Geographic Area.
ARTICLE 3
FEES
A. Franchise Fee. The Franchisor agrees to grant a franchise to the Franchisee, and the Franchisee shall pay to the Franchisor an initial Franchise Fee of $ ________ (________) plus applicable taxes.
B. Refund of Franchise Fee. In the event that the Parties do not move forward with this Franchise Agreement, the Franchise Fee is entirely refundable.
C. Royalties. During the Term of this Agreement, as consideration for ongoing revenue to the Franchisee as a result of the Franchisor's established name, reputation, and expertise in the field, the Franchisee shall pay to the Franchisor regular royalties in the amount of ________ percent ( ________ %) of the total Gross Revenue.
D. Date. The date of payment of the initial Franchise Fee shall be upon signature of this Agreement or within such reasonable timeframe as the Parties hereto may agree. The date of payment for regular Royalties shall be the 1st day of each month.
E. Method of Payment. The Franchisee shall ensure to make their payments to the Franchisor as follows:
1) The initial Franchise Fee shall be payable by: e-transfer , using the information as follows: ________ .
2) The regular Royalties shall be payable by: e-transfer , using the information as follows: ________ .
F. Late Payment. The Franchisee shall incur interest on any late payment of Royalties at a rate of ________ percent ( ________ %) per annum, compounded monthly.
G. Non-sufficient Funds. Where applicable, the Franchisee shall pay for any expenses in connection with cheques returned or non-sufficient funds.
H. Advertising Fee. The Franchisee shall contribute regularly to the Franchise's overall advertising to help promote and increase its recognition. Payment shall be defined hereunder.
I. Additional Fees. The Franchisee shall be responsible for purchasing the initial inventory needed, if any, and initial promotions, the lease of the premises, adding the appropriate chattels and fixtures to the premises, obtaining the necessary supplies and equipment.
ARTICLE 4
ADVERTISING
A. Advertising Venue. All decisions in connection with advertisements and marketing shall be made by the Franchisor, including but not limited to, the specific media outlet, platforms, advertising, promotional content, marketing, broadcasting, printed ads, flyers, brochures, coupons, radio, television, and social media. Any marketing plans or promotional content created by the Franchisee shall require the endorsement of the Franchisor prior to any dissemination, broadcast, or use of such content, and the Franchisor reserves the right to unilaterally decline approval on any requests made by the Franchisee. The Franchisee acknowledges and understands the importance of the Advertising Venue, which impacts both the Franchisor and all other Franchisees alike. The Franchisor does not directly advertise for one particular Franchisee and no direct benefits shall derive to one particular Franchisee therefrom.
B. Advertising Fee. The Franchisee shall pay to the Franchisor a contributing advertisement fee of ________ ($ ________ ), every month.
C. Enquiry. The Franchisee shall be permitted to enquire about the administration of the Advertising Fee and the overall use of the aggregate funds stemming from all Franchisees in the Franchise. Upon such enquiry, the Franchisor shall, as soon as practicable, respond to such with as much information and detail as possible, including spreadsheets and other raw data, to allow the Franchisee to obtain an accurate disclosure on the administration of the funds herein.
ARTICLE 5
ACCOUNTING
A. Accounting Transactions. The Franchisee agrees to keep an accurate accounting of all financial and business transactions throughout the Term of this Agreement including any Renewals, and for a period of time thereafter as may be legally required. Financial Transactions shall be recorded using the Generally Accepted Accounting Principles.
B. Revenue Disclosure. The Franchisee shall disclose to the Franchisor on a monthly basis a revenue report consisting of the Franchisee's gross revenue and such other information as may be required by the Franchisor, with reasonably sufficient detail, and signed by an authorized officer of the Franchise.
C. Accounting Disclosure. The Franchisee shall provide to the Franchisor financial statements of the Franchise and such other information as may be required by the Franchisor from time to time.
D. Bookkeeping Disclosure. The Franchisee shall provide to the Franchisor bookkeeping records and other operational transaction documents as may be required by the Franchisor from time to time.
E. Audit. The Franchisor reserves the right to audit the Franchisee's operations, at its own expense, as the Franchisor deems necessary from time to time, provided such audit takes place during normal business hours and notice to the Franchisee of at least ________ is delivered in advance, either by mail, e-mail, fax, courier or other means, prior to performing such audit, which may include auditing all revenues, business and accounting records, bookkeeping records, invoices, sales receipts, payroll records, bank deposit receipts, and any other supporting information and records of the Franchise including the corporation's records and minute books and other regulatory documents. If the audit is made as a result of the Franchisee failing to disclose any records required hereunder, the responsibility of covering the expenses of the audit shall be borne by the Franchisee. Further, as a result of the audit, if the Franchisor discovers that the Franchisee understates the gross revenues for any period that is greater than 5%, the Franchisee shall be responsible for covering the expenses of the audit.
F. Taxes. The Parties shall ensure compliance with the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1. The Franchisee is an independent contractor and is responsible for all of their own statutory remittances and income tax obligations.
ARTICLE 6
FRANCHISEE OBLIGATIONS
A. Preliminary Obligations. In order to develop and open the Franchise, the Franchisee shall obtain all licenses and permits, at its sole expense, that may be necessary for the operation of the Franchise.
The Franchisee shall complete all of the necessary units of work and training before the end of ________ as part of their mandatory training course at the Franchisor's designated training grounds or facilities.
The training shall be for ________ , and shall consist of the following:
If the mandatory training course is not completed by such time, the Franchisor may unilaterally terminate the Agreement on fourteen (14) days of written notice to the Franchisee, and any Franchise Fee shall be entirely refundable, as described herein, subject to an administration fee of ________ ($ ________ ). In the event that the Franchisee cannot complete the training modules within the prescribed deadline, the Franchisor shall grant an extension of 14 days.
B. Continuing Education. The Franchisor shall implement, from time to time, conventions, seminars, training courses, and the like, in order to provide continuing education to the Franchisee and to provide updates in methods, processes, group programs, and more, for the continuous benefit of the Franchise. Subject to the annual conferences clause, if any, the cost to implement such education shall be borne by the Franchisor, but the cost to make actual attendance is the Franchisee's responsibility.
C. General Ongoing Obligations. The Franchisee shall ensure compliance with the ongoing requirements:
1) Quality Control: the Franchisee shall only sell goods or provide services as authorized by the Franchisor with the established set of standards and protocols. The Franchisee is prohibited from selling goods and services that are not governed by this Agreement or authorized by the Franchisor. The Franchisee shall ensure that during business hours the premises is under supervision of the Franchisee or an authorized manager of the Franchisee, as approved by the Franchisor from time to time. The Franchisee shall only display and advertise signs, brochures and decals as approved by the Franchisor from time to time. The Franchisee shall ensure a high standard of ethical conduct in all interactions with suppliers, customers, clients, and the public, and shall not engage in conduct that, in the opinion of the Franchisor, is damaging to the Franchise, its name, reputation, intellectual property, or goodwill.
2) Standards and Operating Procedures: the Franchisor shall provide to the Franchisee an operating manual describing the processes and operating methods as prescribed by the Franchisor from time to time. All standards and operating procedures shall comply with statutory law. The Franchisee shall further adhere to the following standards:
3) Authorized Supplier: the Franchisee shall order and purchase primary supplies exclusively from ________ .
4) Insurance: the Franchisee shall obtain an insurance policy, at its sole expense, for general liability insurance, fire and extended coverage insurance on its property, chattels, tools and equipment, and commercial package insurance in the amount of two million ($2,000,000.00) per claim. Insurance will be required for the entire Term of this Agreement and for any renewal hereof.
5) Premises Maintenance and Sanitation: the Franchisee shall ensure that the premises, all chattels and fixtures, and wares used in the provision of the goods or services remains clean and sanitary. Health hazards are explicitly prohibited. The Franchisee shall ensure to maintain all equipment, tools, machines, and other appliances used in connection with the provision of goods or services of the Franchise, or where obsolete, the Franchisee shall replace the equipment, tools, machines, and other appliances with new or like-new equipment, tools, machines, and other appliances, or if in the sole and unfettered discretion of the Franchisor, any of the aforementioned equipment needs replacing, the Franchisee shall cause such to be replaced. If, in the sole opinion of the Franchisor, the premises, all chattels and fixtures, and wares are not to the satisfaction of the Franchisor or otherwise compliant with statutory law, the Franchisor shall notify the Franchisee and the Franchisee shall remedy the deficiencies.
6) Inspection: the Franchisor shall be permitted at all times, without notice, to inspect the Franchisee's premises in order to ensure compliance with the terms of this Agreement and to ensure that the Franchisee commits to the provisions on sanitation and maintenance of the premises, and the Franchisor shall notify the Franchisee of any breach or deficiency, and the Franchisee shall promptly address such breach or deficiency. Any non-compliant product or service shall be removed from the premises.
D. Final Obligations. The Franchisee shall keep accounting and business records, consistent with the terms herein, for a period of three (3) years following the end of this Franchise Agreement to allow the Franchisor to make a final audit and to determine the Franchisee's accurateness in their reporting requirements.
ARTICLE 7
FRANCHISOR OBLIGATIONS
A. Preliminary Obligations. The Franchisor shall provide to the Franchisee an initial training program as described herein.
B. General Ongoing Obligations. The Franchisor shall provide to the Franchisee continuing education and shall continue to provide ongoing guidance, know-how, information and advice that the Franchisee deems necessary from time to time.
Training Cost: the Franchisor shall be responsible for the initial cost of the training program and associated modules.
ARTICLE 8
INTELLECTUAL PROPERTY
A. Rights. The intellectual property rights including trademarks, copyrights, patents, or other marks are the property of the Franchisor. Subject to this Agreement, the Franchisor will grant to the Franchisee the right to use and display in the course of the Franchised business the intellectual property marks of the Franchisor. The Franchisor retains all of the intellectual property, and this Agreement shall not be construed to confer upon the Franchisee any intellectual property rights whatsoever in any of the trademarks, copyrights, patents, or other marks or names of the Franchisor, and the Franchisee shall not use the intellectual property in a manner that represents they are the owner of such intellectual property. The Franchisee is prohibited from using any name of the Franchisor or other intellectual property in their corporate legal name or trade name without the prior written approval of the Franchisor, and the Franchisee is prohibited from using such name as their online domain, including social media, and other webpages on which the general public can access information.
B. Enhancements. The Franchisee understands that any enhancements or innovations made by same in the intellectual property or other systems of the Franchise are the property of the Franchisor, without compensation to the Franchisee.
C. Confidential Information. The Franchisee understands that information provided by the Franchisor is confidential and secret, and that the Franchisee has obtained such information solely for purposes of this Agreement and operating the Franchise. The Franchisee agrees to hold such information confidential at all times, during and after this Agreement, and shall not use such information for competing purposes in any manner.
D. Intellectual Property Use. The Franchisee shall be permitted to use such intellectual property, consistent with this Agreement, only in connection with the sale of goods or services as provided herein, or both, with the prior approval of the Franchisor. The Franchisee's right to use the intellectual property is limited to the sale of the authorized goods or services herein. The Franchisor shall at all times have the unilateral right to enter upon any location where the Franchisee operates in order to inspect the Franchisee's display and use of intellectual property and to ensure there are no unauthorized sales. The Franchisee shall comply with all of the Franchisor's demands in that regard.
E. Mark of Franchise. Any use of the mark of the Franchise including any trademark or tradename, logo, font, graphic, emblem, or other distinguishing mark of the Franchise, shall be displayed with the Franchisor's name on same, advertised as Licensee of ________ . Furthermore, the Franchisee shall conspicuously display, at the Franchisor's request, a notice to public stating:
This ________ is a franchised business of ________ and is a licensee of its intellectual property.
F. Infringement. Any attempt or challenge against the Franchisor's intellectual property is prohibited, and if the Franchisee infringes on any intellectual property of the Franchisor, the Franchisor shall have the unilateral right to commence necessary legal proceedings. Any time the Franchisor requests, the Franchisee shall amend or stop using any of the Franchisor's intellectual property.
G. Legal Proceedings. The Franchisee shall cooperate and assist the Franchisor with any legal proceedings initiated by the Franchisor in connection with the Agreement or its intellectual property.
ARTICLE 9
TRANSFER OF FRANCHISE
A. Franchisor Rights. The Franchisor shall at all times have the right to transfer or assign all of the rights and obligations contained within this Agreement. If the Franchisee receives an offer to purchase the Franchise, the Franchisor shall have the right of first refusal, which offer must be accepted within thirty (30) days of receipt from the Franchisee.
B. Franchisee Obligations. The Franchisee is prohibited from transferring, selling, assigning or encumbering, in whole or in part, or from time to time, or in any manner whatsoever, any rights or obligations contained within this Agreement. Any attempt to contravene this section without prior approval from the Franchisor shall constitute a breach hereunder and be cause for immediate termination or such Agreement shall be deemed void, as the Franchisor may decide.
C. Franchisee Transfer Request. Should the Franchisee request a transfer, sale, assignment or encumbrance of this Agreement, the Franchisor must consent, and shall determine such transfer, sale, assignment or encumbrance on the basis of the transferee's initial screening, creditworthiness, apparent ability, and qualifications. Before the Franchisor grants prior approval, the Franchisor may consider:
a. the Franchisee's performance of obligations herein and lack of default;
b. the Franchisor's discretion and the transferee's potential;
c. the payment of a transfer fee and a new Franchise fee, pro-rated for the remainder of the Term;
d. the successful completion of the Franchise training program;
e. a signed full and final release signed by the Franchisee in favour of the Franchisor.
D. Death. Upon the death of the Franchisee or the principal thereof, the Franchisee, or the estate, shall have the right to transfer the Franchisee's business capital to the estate trustee or to the spouse of the deceased, subject to the Franchisor's prior approval, which will be determined on the basis of whether or not they believe that the Franchise can be run appropriately. If the Franchisor is obligated to run the Franchise during any interim period, the Franchisor shall be reasonably compensated by the estate for operating the same.
E. Incapacity. In the event of permanent incapacity, which is defined to include any work stoppage or performance by the Franchisee for a period exceeding six (6) months in any twelve (12) month period, the Franchisee shall have the right to transfer their interest to their spouse, or another principal with reasonable expertise in the field, subject to the Franchisor's prior approval, which will be determined on the basis of whether or not they believe that the Franchise can be run appropriately. If the Franchisor is obligated to run the Franchise during any interim period, the Franchisor shall be reasonably compensated for operating the same.
F. Control. Any change in the control of the Franchisee's business resulting in voting power of less than fifty-one (51%) percent shall be deemed to be a transfer of the Franchise, which constitutes a breach hereunder and be cause for immediate termination or this Agreement shall be deemed void, as the Franchisor may decide. This clause shall apply whether or not the Franchisee is structured as a partnership or corporation, and where the Franchisee is a corporation, any transfer of the voting corporate shares exceeding fifty-one (51%) percent shall be deemed to be a transfer.
ARTICLE 10
TERMINATION OF FRANCHISE
A. Right of Termination. The Franchisor reserves the unilateral right to terminate this Agreement. The Franchisor shall provide written notice to the Franchisee outlining the breaches or defaults herein, including failure to make payment as required, and if the Franchisee fails to remedy and cure such default within 30 days, the Franchisor may terminate the Franchise.
B. Events of Termination. Events of termination that the Franchisor may exercise if the Franchisee has not cured such default within 30 days, include as follows:
C. Post-Termination Obligations. Once the Franchise is terminated as provided for herein, the Franchisee shall forthwith cease to use the Intellectual Property of the Franchisor, including all names and marks associated with the Franchisor such as trade names, legal names, and any other symbol or slogan defined herein. Forthwith upon termination, the Franchisor shall be permitted, at any time, to occupy and make use of the Franchisee's property, free of charge, and all telephone lines or other listings, whether by advertisements or other marketing means, shall be vested in the Franchisor for use or for delegation to another franchisee. The Franchisee shall appoint the Franchisor as its Power of Attorney to allow for the seamless transition of the Franchisee's listings to the Franchisor. The Franchisee shall cease operations and cease to hold itself out as part of the Franchise, and shall transfer all property, such as manuals, records, files, and the like, to the Franchisor. The Franchisee shall pay all monies owing to the Franchisor, including any costs such as legal fees in connection with the termination of this Agreement. The Franchisee shall ensure to undertake all necessary steps in order to transfer the Franchise to the Franchisor.
ARTICLE 11
RESTRICTIVE COVENANTS
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ARTICLE 12
SECURITY
A. Franchisor Security. The Franchisor shall register or cause to be registered any liens or encumbrances on the Franchisee's property as the Franchisor deems necessary in order to secure payment therefrom, including any indebtedness and interest.
B. Personal Property Charge. The Franchisor shall register a charge on the Franchisee's personal property through relevant personal property legislation with any necessary executed General Security Agreement and a registered financing statement, such personal property may include all of the Franchisee's equipment, tools, and accessories used to operate the Franchise, and where such equipment, tools, and accessories has an existing bank security charge, the Franchisor shall have a secondary charge over such.
C. Guarantee. In addition to signing this Agreement, the Guarantor herein shall execute a Guarantee as provided by the Franchisor, wherein the Guarantor shall accept the Franchisee's liability for its indebtedness. The Guarantee shall be limited to the Franchisee's liabilities at the time of execution of this Agreement. The guarantee shall be secured by
D. Release. The Franchisee and Guarantor, jointly and severally, agree to indemnify and hold harmless the Franchisor from all types of action, causes of action, suits, debts, claims, losses, costs, and damages arising from any violation of this Agreement, either from the Franchisee, or any of its agents, employees, contractors, or servants, and the Franchisee shall further remise, release, quit claim, and forever discharge the Franchisor, its officers, directors, employees, agents, heirs, executors, administrators, and assigns of and from all types of action, causes of action, suits, bonds, and any demands whatsoever arising from the Franchise. In the event, however, that the Franchisor defaults on any of the provisions hereunder, the Franchisee shall be indemnified and saved harmless from any loss as a result therefrom.
ARTICLE 13
NOTICES
Any notices, demands or requests given under this Agreement shall be given in writing, either by personal delivery, registered mail, electronic mail, facsimile transmission, prepaid postage, as set out below to each respective address, as follows:
To the FRANCHISOR:
To the FRANCHISEE: