When developing a network, a franchise agreement is the most comprehensive agreement in terms of the commitments made by the parties. There are different types of commercial agreements where, generally, party A will provide a service to party B in exchange for payment of a sum of money.
The franchise agreement is a very well-developed formula because it sets out the scope of the franchisor’s commitments, which are truly the most extensive in terms of network development: the provision of a brand name, the transfer of know-how, and the provision of assistance throughout the duration of the contractual relationship.
And then, on the franchisee’s side, it describes in great detail the commitments that must be made by the franchisee. The franchisee must, of course, pay the sums due to the franchisor for the initial fee, royalties, software and communication, but also, and above all, respect the know-how and implement it in their day-to-day operations.
Thus, the franchise network is somehow a third party, because the franchisor and franchisee must also act in the interests of the network. So this is really one of the particularities that makes this contract quite substantial; it is quite a contract to be carefully drafted and digested.”