The Sub Franchise Agreement is a critical document used in franchise expansion strategies within the Philippines, particularly when a master franchisee (acting as sub-franchisor) wishes to further develop a franchise network through third parties (sub-franchisees). This agreement type is specifically designed to accommodate the three-tier franchise structure while ensuring compliance with Philippine franchise regulations, including the Franchise Investment Act and DTI requirements. It becomes necessary when a master franchisee has obtained rights to grant sub-franchises within a specified territory in the Philippines. The document comprehensively covers business operations, brand standards, quality control measures, financial arrangements, and territory rights, while incorporating necessary protections for the master franchisor's intellectual property and business system. It must align with both the master franchise agreement and local Philippine legal requirements, making it a complex but essential tool for franchise network expansion.
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1. Parties: Identifies all parties to the agreement: the master franchisor, sub-franchisor, and sub-franchisee
2. Background: Explains the franchise system, the master franchise relationship, and the context for the sub-franchise arrangement
3. Definitions: Defines key terms used throughout the agreement, including specific Philippine legal and business terminology
4. Grant of Sub-Franchise: Details the rights being granted to the sub-franchisee, including territorial limits and exclusivity terms
5. Term and Renewal: Specifies the initial duration of the agreement and conditions for renewal
6. Fees and Payments: Outlines all financial obligations including initial fees, royalties, and payment terms
7. Training and Support: Details the training and ongoing support provided to the sub-franchisee
8. Intellectual Property Rights: Covers the usage rights and restrictions regarding trademarks, patents, and other IP
9. Quality Control: Establishes standards and monitoring procedures for maintaining brand quality
10. Operations Manual: References the confidential operations manual and compliance requirements
11. Marketing and Advertising: Details marketing requirements, contributions, and approval processes
12. Reporting and Audit Rights: Specifies financial reporting requirements and audit procedures
13. Confidentiality: Defines confidential information and protection requirements
14. Non-Competition: Establishes restrictions on competitive activities during and after the agreement
15. Default and Termination: Lists grounds for termination and procedures for ending the agreement
16. Post-Termination Obligations: Details obligations and restrictions after agreement termination
17. Governing Law and Dispute Resolution: Specifies Philippine law as governing law and outlines dispute resolution procedures
1. Master Franchisor Approval Rights: Required when the master franchisor retains specific approval rights over sub-franchisee operations
2. Multi-Unit Development: Included when the sub-franchisee has rights to develop multiple units
3. Import Restrictions: Required when dealing with imported products or materials
4. Local Adaptation Rights: Included when the sub-franchisee needs to adapt products/services to local market
5. E-commerce Rights: Required when online sales or digital platforms are part of the business model
6. Crisis Management: Added for businesses requiring specific emergency or crisis protocols
7. Data Protection: Required when handling significant customer data or operating online platforms
8. Environmental Compliance: Added for businesses with significant environmental impact
9. Halal Certification: Required for food businesses serving Muslim communities in the Philippines
1. Schedule 1 - Territory Definition: Detailed description and/or maps of the granted territory
2. Schedule 2 - Initial Fees and Ongoing Payments: Comprehensive breakdown of all financial obligations
3. Schedule 3 - Initial Training Program: Details of required initial training and timeframes
4. Schedule 4 - Approved Suppliers: List of authorized suppliers and purchasing requirements
5. Schedule 5 - Brand Standards: Detailed specifications for brand usage and presentation
6. Schedule 6 - Required Equipment and Inventory: Specifications for required equipment and initial inventory
7. Schedule 7 - Insurance Requirements: Details of required insurance coverage
8. Schedule 8 - Form of Confidentiality Agreement: Template for confidentiality agreements with employees
9. Schedule 9 - Local Permits and Licenses: List of required Philippine permits and licenses
10. Appendix A - Financial Projections: Sample financial projections and assumptions
11. Appendix B - Approved Local Variations: Documented approved variations for the Philippine market
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