Franchise Agreement Vs. Distribution Agreement

A franchise agreement is a contract between a company known as a “franchisee” that confers its brand and business organization rules on an individual or business entity called a “franchisee” and that pays a royalty and/or introductory tax for the use of those trademarks and rules. The franchise agreement allows the franchisee to distribute the franchisee`s products and services as long as the franchisee complies with the franchisee`s rules. Unlike exclusive distribution agreements, a franchisee may or may not have exclusive rights to a given geographic region. What is perhaps even more surprising is that a simple licensing or distribution agreement can be a franchise under provincial franchise law, so the licensor or distributor is subject to strict pre-sale disclosure obligations and harsh remedies for non-compliance. • Requires a franchisee to make an initial and ongoing payment to the franchisee The provinces of Ontario, Alberta, Manitoba, New Brunswick, IEP and British Columbia have enacted specific franchise laws, which require, among other things, disclosure prior to sale by a franchisee to potential franchisees. The purpose of the legislation is to ensure that a potential franchisee has the information necessary to make an informed investment decision and protect both potential franchisees and those already involved in a franchise relationship. Many people don`t understand what the differences are between the different types of agreements – franchising, distribution, agency and licensing – that are made with a third party to represent a company or brand in a certain way. That`s why I`ve tried to explain each agreement below in more detail. A franchise is a particular type of combined license and displacement, in which several elements are present. Lewitt Hackman`s franchise and distribution lawyers are numerous authors and speakers on franchise law and other topics.

You are active and committed members of national franchise organizations. Often, the decision to cut costs can have disastrous consequences for the initial business, because if a court finds that an agreement should have been a franchise agreement, the consequences of this operation can be massive. Streten Mason`s lawyers work for a number of franchisees and have set up a number of contracts and franchise systems for clients. We have also advised a large number of clients on the risks and consequences of entering into a distribution agreement as opposed to a franchise agreement. If you have any questions about this or would like to create a franchise, please contact our team on 07 3667 8966 so that we can help you in this regard. At first instance (among other findings), the judge found in this case that the agreement was indeed a franchise agreement. . . .

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