Rights & Duties of a Franchisee in a Franchise Agreement: Lawyers Advice | Franchise Lawyer in Delhi NCR | Franchise Business Attorney in Delhi NCR |

Franchise Business Lawyer in India | Franchise Business Attorney in India | Franchise Lawyer in Delhi NCR | Franchise Lawyer in Delhi | Franchise Lawyer in Noida | Franchise Lawyer in Gurugram | Franchise Lawyer in New Delhi | Franchise Lawyer in India | Franchise Business Attorney in Delhi NCR | Franchise Business Attorney in Delhi | Franchise Business Attorney in New Delhi | Franchise Business Attorney in Noida | Franchise Business Attorney in Gurugram | Franchise Attorney in India | Franchise Lawyer Advice in Delhi NCR | Franchise Lawyer Advice in Delhi | Franchise Lawyer Advice in Noida | Franchise Lawyer Advice in Gurugram | Franchise Legal Services in Delhi NCR | Franchise Legal Services in Delhi | Franchise Legal Services in Noida | Franchise Legal Services in Gurugram | Franchise Legal Solutions in Delhi NCR | Franchise Legal Solutions in Delhi | Franchise Legal Solutions in Noida | Franchise Legal Solutions in Gurugram |

In a franchise agreement a franchisee is the party to whom the license to carry out business under the same brand name is granted. Just like the franchisor, the franchisee also has certain rights and duties specified under the franchise agreement. But since the franchise agreement does not have a standard format and varies depending on the type of business, even the rights and duties of the franchisee vary from business to business. However, there are some common rights and duties that the franchisee is vested with in every franchise agreement irrespective of the type of business.

Rights of a Franchisee in a Franchise Agreement

1. The Franchisee has the right to use the franchisor’s brand identity.
2. The franchisee also has the right to full disclosure of all material facts relating to the franchise from the franchisor. Earning data or any other important information relating to the franchise must be shown to the franchisee. This may impact the franchisee’s decision to sign the franchise agreement or enter into the franchise relationship. With respect to this “consensus ad idem” as per section 13 of the Contract Act, 1857 is applicable.
3. The franchisee is also entitled to training of its employees from time to time by the franchisor and this is supposed to be free of cost.
4. The franchisee also has the right to terminate the franchise agreement under the following circumstances:
   a. If the franchisor commits fraud or misinterprets the potential profits
   b. If the franchisor goes bankrupt or becomes insolvent
   c. If the franchisor fails to provide training and support as stipulated in the contract

 

Duties of a Franchisee in a Franchise Agreement

1. One of the main responsibilities of the franchisee is to pay royalty and an initial fee to the franchisor in return for the use of their brand name and the assistance provided by the franchisor in setting up the franchise.
2. The franchisee must ensure high degree of customer satisfaction as well as protection. It should provide prompt, Courteous, and efficient services to its customers. This is quintessential because a consumer in case of any grievance relating to default in products or deficiency in services can file a complaint as per section 2 (6) of the Consumer Protection Act, 2019.
3. The franchisee must also sell only those products which meet the franchiser’s uniform standards of quality. They must also follow the instructions of the franchisor relating to the methods and techniques used.
4. Not just the franchisor but the franchisee also must ensure that their practices do not classify as monopolistic as per the Competition Act, 2002. Section 3 of the Competition Act, 2002 reads – “No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.”
5. The franchisee has the duty to protect the franchisor’s confidential information from the third parties during the franchise agreement and even post termination. The franchisee must also not compete with the franchisor during the franchise agreement. This is another issue which is competing with the franchisor’s business during the course of the agreement. This might look like restraint of trade as per section 27 of the Indian Contract Act, 1872. But in the case Gujarat Bottling Co. Ltd. and others v. Coca Cola Co. and Others 1995 SCC (5) 545 the Court held that the franchise restraining the franchisee from dealing, bottling, selling, manufacturing, etc. for another trade mark is not restraint of trade.
6. Sometimes the franchisee is gives the permission to advertise the brand. In such a case, the franchisee must make sure that the advertisements are not misleading to the consumers. Section 21 of the Consumers Protection Act, 2019 talks about the penalties for misleading advertisements.

 

These are some of the basic rights and duties of a franchisee. The franchisee receives certain advantages from the franchise agreement like the opportunity to start a business that already has a level of success. So the franchisee must keep in mind not just his rights but also his responsibilities.
Authored By: Adv. Anant Sharma & Sanjana Akasam