Sample franchise agreement Format
This agreement is made on ________day of ___________, between M/s ABC Pvt Ltd through its Director Mr A Soni S/o Shri B Soni having its registered office 1, ……………………………………………………………………… Delhi- & Corporate office at 2, ………………………………………………, (U.P) (Hereinafter called the party of the First part or the Company or the Seller).
M/s. ______Interial through its proprietor Mr. _________Mir S/o Mr. _________ residing at __________
(Hereinafter called the Party of the Second Part or the buyer).
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Whereas the party of the First Part is manufacturing and marketing their readymade garments products “………………….” & their other brands.
Whereas the party of the Second Part has shown interest for opening a showroom of the party of the First Part which has agreed to appoint the party of the Second Part as its Authorised Buyer on the following terms and conditions:-
That the Party of the First Part hereby appoints M/s_________ Interial the Party of the Second Part as their Operational Brand Franchisee/Consignment Agent and allows it to retail all “xxxxxxxxxxxxx” & their other brands Products through its showroom which will be opened at __________________________
- The party of the Second Part will not sell the product of any other brands in the Show Room.
- That the agreement shall come into effect from 1st February April 2020 and the Party of the First Part shall dispatch and deliver the goods to the party of the Second Part on sale/purchase basis. The freight of goods sent on consignment shall be borne by the party of the First Part i.e. the goods / products shall be supplied to the party of the Second Part on F.O.R basis by Road Transport only (Srinagar,J&K); air freight shall by payable by the party of the Second Part minus subsidy of Road Transport charges.
- That the party of the Second Part shall be allowed a net Sales Margin of 10% on Selling Price (Net realization) upto a sales target of Rs. 50 lacs (Rupees Fifty Lacs) annually. If the Annual Net Sales Amount exceeds Rs. 50 lacs (Rupees Fifty Lacs) but is less than Rs. 50 lacs (Rupees Fifty Lacs) then the Party of the First Part shall award the Second Part an incentive of 2% (one percent) on entire amount. If the Annual Net Sales Amount exceeds Rs. 50 lacs (Rupees Fifty Lacs) but is less than Rs. 80 Lacs (Rupees Eighty Lacs) then the Party of the First Part shall award the Second Part an incentive of 1% (one percent) on the entire amount. For any amount of Annual Net Sales that exceeds Rs. 80 (Rupees Eighty Lacs) an additional 1% (one percent) of the entire amount will be paid as incentive by the party of the First Part.
Calculation for basic Sales Margin will be done monthly. Incentives on the Annual Net Sales If it exceeds Rs. 50 Lacs (Rupees Fifty Lacs) will be determined at the end of the year.
- (a) That the party of the Second Part shall deposit total Net Realization Value (i.e. gross sales including GST/VAT) payment with the party of the First Part in respect of the goods sold on daily basis. This procedure has to be strictly followed. Any delay in depositing the payment for more than 3 working days will attract interest @ 24% p.a. & if the payment is delayed more than 7 days the party of the Second Part will be treated as defaulter.
(b) It is mandatory to send monthly sales and bank deposits showing balance “NIL” on the end of the month before 5th of the next month by the Party of the Second Part as per performa attached herewith by the Party of the First Part.
In case of non-deposit/payment of the daily sales proceeds into the bank account of the party of the First Part, the First Party holds the right to withhold the Sales Margin cheque due towards the Second Party until that time when the Second Party releases the payment of all due amount till the latest date.
5. he store has minimum covered area of 500 Sq. ft.
6. That the party of the Second Part shall arrange the furnished premises as per design and maps provided by the Party of the First Part at their own expenses for the purpose of Brand Retail Showroom of the product under the brand names of “………………” & their other brands only.
7. OPERATING AND STAFFING EXPENSES
a) The party of the Second Part alone shall be responsible for and shall bear all recurring charges and expenses, whatsoever, incurred or to be incurred in carrying on their business without prejudice to the generality of the foregoing, the Second Party shall pay: –
- All rates and taxes and other outgoing payable to the local authorities in respect of their office and storage premises.
- All wages and salaries of the employees/employed in the showroom, all day-to-day expenses, courier, maintenance & running expenses and miscellaneous expenses for operating the showroom.
- All charges in connection with the up-gradation of the computer hardware and peripherals such as printers, scanners, modem, etc.
- All rent and related ancillary expenses of the office or storage premises.
(b) The Second Part shall at its own expense and cost employ / engage as many suitable personnel as the first part may consider necessary (i.e. one sales person per 300 sq.ft of shop area) for maintaining the premises, for displaying the stock and for carrying out other functions in order to provide efficient services to the customers.
The First Party shall (if it feels necessary) assist the Second Party in the selection, recruitment and training of such personnel. The second party shall bear all salaries, expenses and contributions including statutory contributions in respect of such personnel and it is agreed that they shall at no point of time be or construed to be the employees of the Company (party of the First Part).
(c) The Second Party shall use only such software stationery, letterheads, name board and other items as have been either supplied by the Company or approved for use by the Company in writing.
(d)The Second Party shall not at any time release advertisements in newspapers or other publications, brochures, pamphlets, direct mail, etc or undertake any other form of sales promotion in the name of or on behalf of the Company except in the form and manner approved by the Company in writing.
- That their shall be some sales through credit card for which the First Party shall bear the commission which is as actual as charged by the Card Agency. The First Party shall pay this amount of commission to the concerned bank on monthly basis.
- Stocks to be adequately insured for all risk (earthquake, fire, riots) with the policy stating the beneficiary being the first part in event of any claim. The cost of all such insurance will be borne by First Party. In the unfortunate event that any damage shall be incurred by the Party of the Second Part due to such force majeure the liability of the total extent of the damage done is the sole responsibility of the Party of the Second Part and in the event that a settlement claim shall be received from the Insurance company by the Party of the First Part, such amount shall be credited to the Second Part’s account.
- That the Second Party shall deposit the local GST/VAT amount as per Jammu & Kashmir State GST/VAT Rules & maintain all the records of the same. The First Party will reimburse this GST/VAT amount to the Second Party. The Party of the Second Part will be responsible to pay GST (Goods and Service Tax ) on their GST no. against E-Way Bill . The party of the First Part hold the right to keep in abeyance such amount equivalent to 4% of the Value of the Goods sent for which the Part of the Second Part fails to provide the Party of the First Part the necessary ‘Any’ Forms.
- That the working will be on simple sale purchase basis and credit notes will be issued in case of any goods return on the basis of debit note raised by the party of the Second Part and sent with the return documents as per the performa being given by the company.
- The First party will be liable to reimburse only GST/Vat calculated as per law prevailed at that time. All other taxes including Service Tax (if applicable), etc. will be paid by the Second Party. The Party of the Second Part is liable to bear ½ or 50% of the GST (Goods and Service Tax) paid by the First Party for selling the goods to the Second Party. If due to unawareness or negligence on the part of the Second Party a ny liability arises or becomes due, the First Party will not be responsible for that in any manner.
- OWNERSHIP AND CUSTODY OF GOODS
- It is specifically understood and agreed by and between the parties that at all times the Company shall be the sole and exclusive owner of the Products supplied by the First Party to the Second Party under this agreement and/or in the possession of the Second Party or in transit. Nothing herein contained shall be deemed or intended to create any proprietary rights on the Products in favour of the Second Party. The products shall always belong to and remain in the judicial custody of the First Party.
- The Second Party shall not have or claim any right, title, interest, claim or demand in the products entrusted to them and they shall not have any lien or any other claim whatsoever in or upon the Products.
- The Second Party shall not purport to hypothecate, create any right whatsoever in respect of the products entrusted to them under this Agreement.
- The Second Party shall not pledge, loan, gift or in any other manner deal with or dispose of or destroy the products or do any act, deed or thing whereby any right, title or interest of the First Party in the products entrusted to the Second Party are in any manner adversely affected.
- The Second Party shall ensure proper and safe custody of the stock of the First Party.
- The First Party shall be entitled to conduct physical stock verification of the stocks and/or the books of accounts maintained by the Second Party either by its own employees or by the auditors or through any other person authorized by the Co., periodically or at any time as may be convenient during a working day. In the event of there being any difference between the physical stock and the stock as per the books of the First Party, then the value of such stocks at the M.R.P. less Sales Margin shall be compensated to the First party in addition to the interest of 2% per month for the period between the last reconciliation/business commencement date till the day such shortage was found. Such amount shall be deposited in the Bank immediately, failing which the amount involved along with the interest shall be recovered from the Sales Margin payable to the Second Party by the First Party.
14. a) That the second party shall be responsible for any shortage or loss due to the pilferage or damage to the goods. However, the second part shall not be held for the damages / loss that may be incurred due to reasons beyond their control i.e. fire, riots, natural calamities like flood, earthquake , etc. which would be covered by Insurance Company and claims payable to the first party. In the case of theft, burglary and robbery the total value of the goods stolen is the responsibility of the party of the Second Part.
(b) That in the event of any loss / damages arising due to fire, earthquake ,riots or any other force majeure conditions may be, the party of the First part shall not be liable any damages to the building and no Sales Margin will be paid to the Party of the Second Part for the period till the building becomes usable for the purpose of business of the Party of the First Part.
15. That The party of the Second Part will give refundable interest free security deposit of Rs.7,00,000 (Rs. Seven Lacs Only) which will be refunded only when the agreement is terminated by the party of the First Part provided NO dues are outstanding by the Second Party (Daily Sales Amount, Furniture purchase, etc.)
16. That the party of the Second Part agrees and undertakes to keep four without dated cheques of Rs.250000/-each aggregating to Rs.10 lacs as security with the party of the First Part during the tenure of this agreement. The party of the First part shall be entitled to cash the said cheques in case of default in payment of its liabilities by the party of the Second Part in accordance with the Law.
17. That party of the Second part shall be responsible for all the insurance of furniture, fixture, interior, air conditioner, cash-in-hand at the shop, office equipment etc. of the shop. However, the cost of all such insurance shall be borne by the second party. The copy of such policy shall be provided to the party of the First Part.
18. That the party of the Second Part shall maintain proper records which includes books of accounts and stock showing the sales made and the stock lying with them in respect of the goods dispatched under this agreement and shall send every month a sales & stock statement to the party of the First Part along with Trial Balance up to 7th of next month. In order to clear the non-saleable stocks lying with the party of the Second Part / showroom the party of the First Part can ask the party of the Second Part for organizing the clearance sale.
19. That in the case of this agreement being terminated the party of the First Part shall buy back all the non-saleable stock from the Second Party at the price charged by the First Party in the invoice. In case the Second Party terminates the agreement within 3 years the party of the First Part in not liable to buy back the stock lying at their shop.
20. That this agreement is valid for the period of 3 years from March 1st 2020. The party of the Second Part will be locked in for a period of 3 years. If the party of the Second Part terminates the agreement before the expiry of 3 year then it will have to bear the cost of In-store branding, Glow Signboard, Software Wizapp cost, 50% Advertising costs in newspapers & cable TV and other media used for the benefit the franchisee’s sale as well as full transportation costs to and from franchisee’s store location and reshelving fee of 10% of goods sent back.
If the party of the Second Part fails to send the party of the First Part daily sales data and the Cash deposits for a period of more than one (1) month then the party of the First Part retains the right to terminate the agreement and confiscate the interest free security deposit given by the party of the Second Part. On termination of this agreement by the party of the First Part, the party of the Second Part shall hand over all the stocks lying with them to the party of the First Part immediately and all accounts shall have to be cleared with the party of the First Part in respect of the goods sold and shortages or loss if any.
21. That the party of the First Part shall maintain a total stock quantity of 2000 pieces of garments and accessories at all times. Stock quantity at this location shall be voluntarily increased by the First Party according to the monthly average pieces sales ratio.
22. That the party of the First Part will supply the stationery / packing material to the party of the Second Part from time to time, free of cost, to promote the sales and facilitate the customers .
23. That all the expenses at any stage in all conditions and circumstances of advertisements like Banners, hand bills, through radios / A.I.R., Cables, TV, Posters, Hoarding, Newspapers, Newsprint, Magazines etc. shall be borne and arrange by the party of the First Part to promote the sales of the product of the Company, albeit not exceeding 3% of the Net Sales till the time such expenses are met.
24. That party of the Second Part can’t sell products at a price higher than maximum retail price quoted on the products. However, discounts/clearance sales will be allowed to customers from time to time with instructions/policies of the party of the First Part.
25. That the party of the Second Part will make no sales to dealers/whole sellers.
26. In the event of the failure of the party of the Second part to comply with the above provisions or to provide proper services to the customers, the Party of the First Part shall be entitled to terminate the agreement without any prior notice and giving sufficient evidence to prove the failure of the Party of the Second Part.
27. the party of the Second Part shall open the “xxxxxxxx” Brand Show Room in all 7 days of the week and, if required the party of the Second Part shall take prior approval for opening the shop from the concerned authorities.
28. That any violation in the above terms and conditions shall give the right of termination of this agreement to the party of the First part. On termination of this agreement, the party of the Second part shall hand over all the stocks with them to the Party of the First part immediately and full accounts in respect of the goods sold and shortages or loss if any
29. Any dispute arising from or in connection with this Agreement shall be settled by amicable efforts from the parties to the dispute or / otherwise it may be referred to arbitration. In case of arbitration, it shall be referred to Mr. A Soni who is a pre-approved arbitrator by both the parties and the proceedings of such an arbitration will only be held in Delhi. Such an Arbitration proceeding will adhere to the Arbitration and Conciliation Act, 1996. The competent court in Delhi alone shall here by have jurisdiction in respect of all matters arisen out of this Agreement or Arbitration.
30. This agreement is done with the aide and help of Mr. D Sharma who takes full responsibility of stock shortages and reconciliation, meeting sales targets and Retail Costs, daily data transfer, supply of any Forms, collection and deposition of daily Sales proceeds in ABC PVT LTD.’s bank account.
31. There are two identical copies of the same agreement printed on Indian Non-Judicial Stamp paper nos. ________and_______ In the event that either of them differ then the final agreement copy that both parties will have to adhere to will be Stamp paper no. _________.
All disputes arising under or out of this Agreement or in any way connected with this Agreement shall be subject to the jurisdiction of the courts of ……….
IN WITNESS WHEREOF, the parties have this first day of July 2020 caused their respective seals to be affixed on this Agreement.
For FRENCHISER ABC PVT LTD For
(Authorised Signatory) (Authorised Signatory)
IN PRESENCE OF
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