The Direct Franchise Agreement is the primary legal instrument used to establish and govern the relationship between a franchisor and a franchisee in Hong Kong. This document is essential when a business wishes to expand through franchising, granting rights to independent operators to use its business system, trademarks, and proprietary information. The agreement must comply with Hong Kong's common law system and relevant ordinances, including those governing contracts, intellectual property, competition, and data privacy. It typically includes comprehensive provisions covering operational standards, quality control, training requirements, financial obligations, and territorial rights. The Direct Franchise Agreement is particularly crucial as Hong Kong lacks specific franchise legislation, making it essential to have a detailed contract that clearly defines all aspects of the franchise relationship.
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1. Parties: Identification of the franchisor and franchisee with full legal names and addresses
2. Background: Context of the agreement, brief description of the franchise system and business
3. Definitions: Detailed definitions of key terms used throughout the agreement
4. Grant of Franchise: Specific rights being granted, territory, and exclusivity provisions
5. Term and Renewal: Duration of the agreement and conditions for renewal
6. Franchisor's Obligations: Support, training, and ongoing assistance to be provided by the franchisor
7. Franchisee's Obligations: Operating standards, compliance requirements, and performance obligations
8. Intellectual Property: Usage rights and restrictions for trademarks, patents, and other IP
9. Fees and Payments: Initial franchise fee, ongoing royalties, and other financial obligations
10. Operations Manual: Reference to and compliance with the operations manual
11. Training: Initial and ongoing training requirements and provisions
12. Marketing and Advertising: Marketing obligations, contributions, and approval processes
13. Records and Reporting: Financial recording requirements and reporting obligations
14. Insurance: Required insurance coverage and minimum limits
15. Transfer Provisions: Conditions and procedures for transferring the franchise
16. Termination: Grounds for termination and procedures
17. Post-Termination: Obligations and restrictions after agreement ends
18. Confidentiality: Protection of confidential information and trade secrets
19. Governing Law: Specification of Hong Kong law as governing law
20. Dispute Resolution: Procedures for handling disputes including mediation/arbitration
21. General Provisions: Standard boilerplate clauses including notices, amendments, etc.
1. Development Rights: Used when franchisee has rights to develop multiple units or sub-franchise
2. E-commerce Rights: Include when online sales are part of the franchise system
3. Import/Export Restrictions: Necessary when franchise involves international trade
4. Data Protection: Detailed section when significant personal data processing is involved
5. Environmental Compliance: Required for franchises with significant environmental impact
6. Multiple Unit Operations: Include when franchisee operates multiple locations
7. Force Majeure: Detailed provisions for unforeseen circumstances, particularly relevant post-COVID
8. Property and Leasing: Include when franchisor has specific property requirements or controls
9. Equipment Leasing: When franchisor provides or requires specific equipment
10. Non-Competition: Detailed restrictions beyond standard post-termination provisions
1. Schedule 1 - Franchise Location and Territory: Detailed description of approved location and territorial rights
2. Schedule 2 - Initial Fee and Ongoing Payments: Comprehensive breakdown of all financial obligations
3. Schedule 3 - Initial Package and Support: Details of initial training, support, and equipment provided
4. Schedule 4 - Marks and Intellectual Property: List and images of all trademarks and protected IP
5. Schedule 5 - Initial Investment: Breakdown of required initial investment and working capital
6. Schedule 6 - Training Programs: Details of mandatory initial and ongoing training
7. Schedule 7 - Minimum Performance Requirements: Specific performance targets and metrics
8. Schedule 8 - Approved Suppliers: List of approved suppliers and purchasing requirements
9. Schedule 9 - Required Insurance: Detailed insurance requirements and minimum coverage
10. Appendix A - Personal Guarantee: Form of personal guarantee if required
11. Appendix B - Confidentiality Agreement: Form of confidentiality agreement for employees
12. Appendix C - Operations Manual Table of Contents: Overview of operations manual content
Authors
Relevant legal definitions
Clauses
Relevant Industries
Food and Beverage
Retail
Education and Training
Health and Fitness
Beauty and Wellness
Professional Services
Automotive Services
Home Services
Technology and Electronics
Fashion and Accessories
Healthcare Services
Child Care Services
Hospitality
Entertainment
Real Estate Services
Relevant Teams
Legal
Operations
Finance
Compliance
Commercial
Business Development
Brand Management
Training
Quality Assurance
Supply Chain
Property Management
Regional Management
Relevant Roles
Chief Executive Officer
Chief Legal Officer
Chief Financial Officer
Chief Operating Officer
Franchise Development Director
Legal Counsel
Commercial Director
Operations Director
Business Development Manager
Franchise Manager
Compliance Officer
Brand Manager
Training Manager
Financial Controller
Property Manager
Regional Manager
Quality Assurance Manager
Supply Chain Manager
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