What should be in the contract

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To prevent this from happening, the contract should clearly state how the royalties will be calculated. It is better to tie the royalties to the revenue amount, while it is important to differentiate the percentage depending on the achievement of the forecast revenue amount, at which the outlet will achieve the planned profit rate.

That is, it is similar to a kind of rent holiday, when at the cambodia whatsapp number data beginning the percentage of payments is small or completely absent, and as it develops, turnover and profit increase, it grows. With this approach, even with a decrease in income, the franchisee will have the opportunity to save the business.

The amount of remuneration must always be fixed in the contract; without this clause, the contract can be considered not concluded.

What should not be in a contract
If royalties are calculated using a formula, there should be no unknown variables, everything should be deciphered and explained. It is also better not to specify in the agreement that royalties are fixed, ongoing payments or a certain percentage of revenue that the franchisee pays regardless of their profit indicators.

It is also worth avoiding such formulations as "the franchisor undertakes to review the amount and terms of royalty payment in the off-season" - which month should be considered "off-season", how the royalty will be calculated - no specifics. This is precisely what can lead to a difficult situation, when the franchisor will act at its own discretion, and the franchisee will be forced to pay, even working at a loss.

Read on the topic: How does a franchise work in business

Marketing
A clause that everyone seems to know should be in a contract, but it also often turns out to be not clearly formulated and not thought out to the end.