FRANCHISER CUM SUB FRANCHISEE AGREEMENT- GRANTING FRANCHISE

RIGHTS - sample

This AGREEMENT made at ………..on this ………….day of ……..20….. between

XYZ Sdn Bhd, a company incorporated under the Companies Act, .. and having its
registered office at………….. , hereinafter called “the Franchisee” (which expression
unless it be repugnant to the context or meaning thereof be deemed to mean and includes
its successors and assigns) of the ONE PART and ABC Sdn Bhd a company incorporated
under the Companies Act, …. and having its registered office at………….. hereinafter
called “the Sub-Franchisee” (which expression unless it be repugnant to the context or
meaning thereof be deemed to mean and includes its successors and assigns) of the
OTHER PART.

WHEREAS

(1) M/s ………….. , which is a company incorporated under the ………Act of …

and having its registered office at………….. is a well established and reputed
multinational company operating in 35 countries of the world, doing the
business of “….” brand high quality food products of various countries.
(2) The said M/s ……………. has, through its experience and extensive research,
developed many famous food products which have become very popular in
different countries of the world.
(3) By a Franchise Agreement made at ………………………… on ……………
day of……………20…….between M/s ……………. Franchiser of the one
part and M/s ... of the other part and referred to as the Franchisee herein, the
Franchiser has granted the right to undertake franchise business throughout
the territory of …… with the right to appoint sub-franchisees within the
territory to exploit the same on the terms and conditions laid down in the said
agreement dated …………The said agreement dated………is annexed to this
agreement and marked as Annexure I.
(4) The Franchisee is desirous to appoint sub-franchisees for the sale of food
products of the Franchiser in various parts of the country. It has negotiated
with various Entrepreneurs, who were interested to undertake Franchise
business of the Franchiser in the territory of ……. After negotiations, the
Franchisee has decided to appoint the Sub-Franchisee as Franchisee for
undertaking Franchise business in territory of …..
(5) The Franchisee declares that it has not appointed any Franchisee to undertake
the franchise business in … food products in the said territory, hereinafter
called ‘the Business.”
(6) The Franchiser has intimated to the Franchisee that the market of …. food
products in …… will be developed by hard work, prompt and efficient,
satisfactory and courteous service of the Sub-Franchisee, as there are variety
of food products of different systems in ….. and there are various outlets of
fast food in the said territory.
(7) The Sub-Franchisee has no experience in dealing with food products, but he
has the experience of business of different products and has sufficient finance
 for undertaking the franchise business in … and it has also assured the
Franchiser to develop the Franchise business in …..
(8) The Sub-Franchisee has acquired the ownership of Shop No……….., in
………. hereinafter called the said premises, where the Sub-Franchisee has to
open outlet for the franchise business.

NOW IT IS HEREBY AGREED BETWEEN THE PARTIES AS FOLLOWS:

(1) The Franchisee hereby grants to the Sub-Franchisee the right to carry on the
Franchise Business, subject to the terms and conditions of this Agreement in
the Premises.
(2) Subject to clause ……….of this agreement relating to termination, this
Agreement will subsist for a period of 5 years commencing on the ……….day
of …………..20…..
(3) The Franchisee with the authorization of proprietor of the Trade Mark,
authorizes the sub-franchisee to use the trade marks solely for the purpose of
the Business in the territory in accordance with the instructions and directions
of the Franchiser and the Franchisee. The Sub-Franchisee will not do anything
which may damage or prejudice the goodwill or reputation of the Trade Mark.
The Sub-Franchisee will also ensure that no third party infringes the Trade
Mark of the Franchiser in the territory and if he comes to know about the
infringement of the Trade Mark, the Sub-Franchisee shall promptly inform the
Franchisee and the Franchiser about the same in writing.
(4) The Franchisee shall provide the following services to the Sub-Franchisee:
a. Arrange comprehensive training through the trainers of the Franchiser in
the commencement and operation of the Business. The said training will
be for a period of 2 weeks and at the place of the Franchisee and the Sub-
Franchisee has to depute its Manager to the Franchisee place for training
at its own expenses. The sub-franchisee will have to pay ……………
towards his contribution for the training expenses to be paid to the
Franchiser;
b. To provide a copy of the Manual published by the Franchiser containing
the lay out of the outlet, staffing requirement of outlet, Staff job
description, service standards, standard of quality of the products to be
sold at outlet, staff uniform, cleaning routines, menu of the outlet, system
of the business, technical know-how and other relevant information
relating to conduct of the said Business;
c. To provide help and guidance in establishment, and efficient operation of
the Business;
d. To give update information received from the Franchiser containing the
improvement or alterations in the Manual and Business system or the
products to be serviced at the outlet.
e. To furnish all material for advertising and promotion of the Business
received from the Franchiser and prepared by the Franchisee himself in
…. for use;
 f. To furnish newsletters received from the Franchiser containing the
development of the Business, position of the Franchise business in
International market and other information useful for the franchise
business;
g. To provide guidance or help on the written request in the matters of
management, finance and promotion of the Business;
h. To provide such continuing assistance, advice and guidance to the sub-
franchisee as the franchisee considers reasonable and necessary for the
efficient functioning of the business.
(5) The Sub-Franchisee shall pay to the Franchisee the amounts as specified
below:-
i. A sum of RM……………on the execution of these presents;
ii. Monthly franchise fee at the rate of 12% of the total value of all
invoices rendered by the sub-franchisee without deduction of any
taxes, expenses, commissions, or other charges or debits
whatsoever will be payable monthly before the 7 th day of the
month following the month to which the fee relates;
iii. Sum @ 2% of the previous month’s gross turnover towards
contribution to Fund for Advertising and Promotion.
(6) In order to maintain uniformity and standards of the Business throughout the
world and keep the reputation and prestige of the Trade Marks of the
Franchiser, the Sub-Franchisee undertakes to the Franchisee as under:-
i. To ensure that there are sufficient funds for the operation of the
Business under this Agreement;
ii. To commence the Business within one month of these presents;
iii. To use the Marks in the Business and to maintain the high
standards associated with the Marks;
iv. To keep confidential the manual, methods and system of the
Business and information relating to method of operation,
advertisement, present or policies of the Franchiser or any other
information relating to the operation of the Franchiser;
v. To obtain a signed confidentiality undertaking from all its
employees at the time of their joining service of the sub-franchisee
in the form set out in Annexure II enclosed herewith;
vi. To obtain licenses, permissions from the State Government, local
or statutory authority to commence and operate the Business and to
keep the said licenses and permissions in force;
vii. To comply with all statutes, by laws and other regulations
prescribed by the Government of ….., State Government, local or
statutory authority from time to time relating to the conduct of the
Business;
viii. To refer the enquiry received about the Business to the Franchisee
or the concerned sub-franchisee regarding the supply of franchise
products to locations out of the Territory;
ix. To use the stationery and forms as prescribed by the Franchisee in
connection with the Business for external use;
 x. Not to be engaged directly or indirectly in any similar business
which may compete with the Business or any part of it in the
Territory or in any other area where it may compete with any other
franchisee or sub-franchisee;
xi. Not to solicit customers from outside the Territory;
xii. To carry on the Business from the Premises only;
xiii. To obtain insurance policy in the joint names of the Franchisee and
the Sub-Franchisee against loss or damages by fire, earthquake,
flood, cyclone, etc. with an insurance. The Sub-Franchisee shall
also take insurance policy against all liability (including product
liability) of the Sub-Franchisee and the Franchisee and to the Sub-
Franchisee’s employees or to the members of the public. The
Franchisee shall keep the insurance policies in force during the
term of the business and will not do or omit to do or be done or
permit or suffer any act, deed or thing which might or could
prejudicially vitiate or affect any such insurance;
xiv. The Sub-Franchisee will indemnify and keep the Franchiser and
Franchisee indemnified against all claims, demands, actions,
proceedings, losses, damages, recoveries, judgments, costs,
charges and expenses which may be made, or brought or
commenced against the Franchiser or the Franchisee or which the
Franchiser or the Franchisee may or may have to bear, pay or
suffer, directly or indirectly due to any act, default or omission by
the Sub-Franchisee in conducting the said Business;
xv. To state in all correspondence and literature the fact that the Sub-
Franchisee is an Independent Sub-Franchisee of the Franchiser or
the Franchisee and in no other way connected with it;
xvi. To use his best endeavours and hard work in the conduct of the
Business and to carry on the Business diligently and in a manner in
all material respects to the satisfaction of the Franchisee and in
accordance with the requirements and standards of the Franchiser.
(7) The Auditors, inspectors or authorized representatives of the Franchisee and
Franchiser will be authorized to inspect and audit the books of account and all
supporting vouchers, bills, documents of the sub-franchisee relating to the
Franchise business at any time and for that purpose the sub-franchisee will
permit the auditors and authorized representatives Franchisee and Franchiser
to enter its premises and co-operate with them and furnish to them all
documents, accounts, vouchers, etc as required by them. If after the audit or
inspection of the accounts, it is pointed out by the Auditor of the Franchisee
and Franchiser that the accounting of the sub-franchisee relating to the
calculation of the franchise fee and/or any other financial matter is not correct,
the Sub-Franchisee will rectify the said defect in the accounts and if any
amount towards franchise fee has been sent less earlier, the balance amount
will be sent to the Franchisee within a period of fifteen days from the receipt
of audit report along with interest @ 2% per month or part of the month.
(8) The authorized representatives of the Franchisee and Franchiser will be
authorized to visit the Premises at all reasonable times for the purpose of
checking the quality of the products supplied by the Business and the manner
in which the Business is being carried on and of inspecting the material and
equipment being used in connection with the Business. If after the inspection,
the said authorized representatives point out some shortcoming or defect in
the quality or standard of the products supplied and the system, etc., the Sub-
Franchisee shall promptly rectify the same and report the compliance to the
Franchisee or Franchiser as the case may be.
(9) The Sub-Franchisee shall maintain proper books of account relating to the
Business with supporting vouchers, invoices and documents and preserve the
same for the period of three months after the end of financial year to which it
relates. The Sub-Franchisee shall also furnish the annual Balance Sheet and
Profit and Loss Account within thirty days after the end of each financial year
with a certificate from the Auditor as to the turnover such period calculated in
accordance with this Agreement.
(10) The Sub-Franchisee hereby agrees that it shall not have the right to assign or
transfer its rights and obligations under this Agreement to any third party
without the written consent of the Franchisee in writing. In case the Sub-
Franchisee proposes to assign or transfer its rights and obligations under this
agreement, it shall make a proposal for such assignment or transfer along with
the details of the business history and experience of the proposed transferee or
assignee, copy of the proposed transferee’s written offer to purchase the said
business from the Sub-Franchisee and any further information which the
Franchisee may reasonably require. The Franchisee will give its consent for
the transfer or assignment, provided the following conditions are fulfilled:-
i. The proposed transferee or assignee meets the standards as
required by the Franchisee and Franchiser about business
experience, financial status and ability. The proposed transferee or
assignee should be able to undertake the franchise business
efficiently and diligently and willing to execute an agreement with
the Franchisee for a period of not less than five years commencing
on the date of the transfer or assignment of the said business.
ii. The Franchisee may instead of giving its consent for transfer or
assignment of the said business, may opt to purchase the said
business or get the said business transferred in favour of its
nominee for the same amount and on the same terms as those set
out in the offer of the transferee. The Franchisee may exercise such
option by giving a notice in writing to the Sub-Franchisee within
one month from the date of receipt of the proposal from the Sub-
Franchisee.
iii. If the Franchiser does not opt for purchase of the said business or
get the said business transferred in favour of its nominee, it will
give its consent for transfer of the said business in favour of
proposed transferee and on such consent being given, the proposed
shall deposit thirty per cent of the consideration amount with the
 Franchisee and shall pay the balance 70% of consideration amount
to the Franchisee upon completion of the transfer. Thereafter, the
Franchisee shall pay the consideration amount received from the
transferee after deducting the amount of any unpaid obligations of
the Sub-Franchisee to the Franchisee within ten days from the date
of completion of the transfer of the business.
(11) The Franchisee shall be entitled to terminate this Agreement upon occurrence
of any event of default specified below:-
i. If the Sub-Franchisee fails to commence the business within the
period of one month from the date of these presents;
ii. If the Sub-Franchisee fails to observe and perform any covenants,
stipulations or obligations hereunder or commits a breach of any of
the terms, conditions or provisions of this Agreement or its part to
be observed or performed;
iii. If the information or representations made by the Sub-Franchisee
in the application form or supporting details proves to be incorrect
in any material respect;
iv. If the Sub-Franchisee passed any resolution for winding up or
allows a petition for winding up presented before a Court against it
or if a receiver or liquidator is appointed of the whole or part of the
assets, properties or undertakings of the Franchisee or compounds,
with or makes any composition with its creditors;
v. If the Sub-Franchisee suffers any adverse material change affecting
the financial position of the Sub-Franchisee or by any act or
omission of the Sub-Franchisee, the Franchisee has reasonable
grounds to apprehend breach of the terms and conditions of this
agreement in the future or that its right may be prejudiced or be in
jeopardy;
vi. If the Sub-Franchisee fails to pay, to submit any document or
information required under this Agreement within 10 days
following its due date;
vii. If the Sub-Franchisee ceases or takes any steps to cease the
business;
viii. If by the act, omission or commission of the Sub-Franchisee, it is
suspected by the Franchisee that any secret information, know-how
relating to the business has been disclosed by the Sub-Franchisee
to the third parties and Sub-Franchisee cannot satisfy the
Franchisee that his apprehension is untrue;
ix. If the Sub-Franchisee challenges the validity of the Trade Marks of
the Franchiser or Franchisee.
x. If the Sub-Franchisee commits default or neglect in maintaining
the quality and standard of the products sold by it;

Provided that in the case of default or neglect affecting the quality

or standard of the food products to be sold in outlet of Sub-
Franchisee, the Franchisee shall serve a notice to the Sub-
 Franchisee for rectification of the default or neglect, and if default
continues beyond 48 hours from the time of the written notice, the
Franchisee may terminate this Agreement:

Provided further that in the case of default or neglect of any other

nature, the Franchisee shall have the right to terminate this
agreement if default continues beyond ten days from the time of
the written notice.
(12) Upon termination of this agreement on the occurrence of any default as
provided hereinabove, the Sub-Franchisee and Franchisee without
prejudice to and in addition to their rights and obligations shall take the
following actions:-
i. The Sub-Franchisee shall stop doing the said franchise business
and to make use of the Trade Marks of the Franchisee and will
return the copy of the Manual along with translated copies thereof,
service specifications, book of instructions regarding book keeping
and accounting procedure and all documents, stationery, material
for advertisement and promotion, signs and other items owned by
the Franchisee and in the possession of the Sub-Franchisee and in
case of default by the Sub-Franchisee, the Franchisee shall be
entitled to enter upon the premises of the Sub-Franchisee to take
possession of the manual, stationery, and other material and goods
from the Sub-Franchisee.
ii. The Sub-Franchisee shall pay all sums due at or after the date of
termination to the Franchisee without any deduction or set off,
within a period of seven days of the termination and if any sum is
found to be payable to the Franchisee, the Sub-Franchisee shall
pay the said sum to the Franchiser without any deduction or set off.
iii. The Sub-Franchisee shall assign all his rights under this
Agreement to the Franchisee or his nominee.
iv. After termination of this agreement, the Sub-Franchisee shall not
for one year, directly or indirectly do the business similar to the
franchise business or otherwise compete or assist anybody to
compete with the Franchisee or any other Sub-Franchisee
appointed in the territory. The Sub-Franchisee shall not solicit the
customers of the Franchiser or of any Sub-Franchisee appointed by
the Franchisee in the territory.
v. In accordance with section 10 of the Power of Attorney Act, …,
the Sub-Franchisee hereby appoints, nominates, constitutes and
appoints the Franchisee its Attorney to take necessary action to
ensure the compliance of the actions to be taken by the Sub-
Franchisee under this clause of this Agreement.
(13) Any relaxation, forbearance, delay or indulgence on the part of the Franchisee
in enforcing any of the terms and conditions of this agreement or the granting
of time by the Franchisee to the Sub-Franchisee shall not prejudice, affect or
restrict the rights of the Franchisee hereunder nor shall any waiver by the
 Franchisee of any breach hereof operate as a waiver of any subsequent or any
continuing breach hereof.
(14) The Sub-Franchisee shall within one week from the date of commencement
of business, take insurance policy in the joint names of the Franchisee and the
Sub-Franchisee against loss or damages by fire, earthquake, flood, cyclone,
etc. with an insurance. The Sub-Franchisee shall also take insurance policy
against all liabilities (including product liability) of the Sub-Franchisee and
the Franchisee and to the Sub-Franchisee’s employees or to the members of
the public. The Sub-Franchisee shall keep the insurance policies in force
during the term of the business and will not do or omit to do or be done or
permit or suffer any act, deed or thing which might or could prejudicially
vitiate or affect any such insurance. The Sub-Franchisee shall deposit the
insurance policies and receipts for the premium paid with the Franchisee
within fourteen days from the commencement of the business. In case the
Sub-Franchisee fails to insure as provided above, the Franchisee may take
insurance policies and may recover the premium paid from the Sub-
Franchisee without prejudice to the other rights of the Franchiser in respect of
such default. In the event of any claim arising under such insurance, the Sub-
Franchisee shall intimate the Franchisee about the same and comply with all
instructions of the Franchisee in connection therewith and to take steps,
actions and proceedings as may be necessary and if so required by the
Franchisee receive any monies, payable in respect thereof for and on behalf of
and in trust for the Franchisee and deliver the same to the Franchisee upon
receipt thereof without claiming any part thereof on any account whatsoever.
Notwithstanding anything contained hereinabove, the Franchisee may at its
option agree that any insurance proceeds received under the insurance policy
may be applied in making good the damages or in replacing the goods or
equipments or any item thereof by other similar goods or equipments to
which the terms of this agreement shall apply.
(15) This agreement shall be governed and construed in all respects in accordance
with the laws of …. and any dispute or question regarding the interpretation
of any clause or the rights, duties or liabilities of either party under this
Agreement or otherwise in connection with this agreement, the matter in
difference shall be referred to an arbitrator appointed by the …… of
Arbitration, …… and the provisions of Arbitration Act, .. or any statutory
modification thereof shall be applicable to such reference. The award of
Arbitrator shall be final and binding on both the parties.
(16) The validity and interpretation of and the legal effect to be accorded to all
provisions of the agreement shall be determined and applied according to the
laws of ...
(17) This agreement may be amended only by a writing signed by the duly
authorized representatives of both parties and specifically the referring to
itself as amendment to this agreement.
(18) Notice and other communications under this agreement shall be in writing
addressed as indicated in the description of the parties herein or as either
party may request in writing and the effective date of each is the date of its
 prepaid deposit in the mail for dispatch by air or such service properly
addressed. Any notice sent by cable, telex or facsimile shall be deemed to
have been served on the next day following the date of dispatch thereof.
(19) It is hereby agreed by and between the parties hereto that this Agreement is
subject to the provisions of the Agreement dated ……….executed between
M/s …………., Franchiser of the One part and M/s ……….., the Franchisee
of the other part and referred to as the Franchisee herein. The Sub-Franchisee
undertakes that it will comply with the terms and conditions of the said
agreement and will not do anything which will be violation of the terms and
conditions of the said agreement.
(20) The parties hereto agree that they shall not be responsible for failure to
perform of their obligations under these presents due to force majeure, which
shall include but not limited to fire, flood, strike, labour strikes and disputes,
embargo put by the government of the country of any party, shortage of
labour, raw material, or any other reason of such party. If the circumstances
leading to force majeure occur, the affected party shall give notice thereof to
the other party. If the circumstances or event of force majeure continue for a
period exceeding six months, either party may terminate this agreement.
(21) This agreement shall be executed in triplicate. The original shall be retained
by the Franchisee, duplicate by the Sub-Franchisee and triplicate by the
Franchiser.
(22) The stamp duty and other expenses in respect of this agreement, duplicate and
triplicate thereof shall be borne and paid by the Sub-Franchisee.
(23) All prior agreements or arrangements whether oral or written between the
parties or relating to the conduct of franchise business shall be deemed to be
cancelled and superseded by this agreement.
(24) The headings of the clauses of this agreement are meant only for convenience
of reference and shall not in any way be taken into account in the
interpretation of these presents.
(25) If any clause contained in this Agreement or any part thereof is declared or
become unenforceable, invalid or illegal due to any reason whatsoever, the
other terms and conditions and provisions of this Agreement shall remain in
full force and effect as if this Agreement has been executed without the
offending clause appearing herein. In such case if the sub-Franchisee is of
the opinion that exclusion of such clause adversely affects his right to receive
the payment of fees to the franchisee or the franchisee’s marks and know-how
methods of the Business, then the Franchisee may terminate this agreement
by giving a notice of thirty days to the sub-franchisee.

IN WITNESS WHEREOF the parties hereto have executed these presents and duplicate
copy thereof on the day and year hereinabove written.