The Exclusive Territory Franchise Agreement is essential for businesses expanding through franchising in Hong Kong, where franchise relationships are primarily governed by general commercial law principles rather than specific franchise legislation. This agreement is used when a franchisor wishes to grant exclusive rights to a franchisee to operate within a defined territory, preventing the franchisor from appointing other franchisees or operating competing businesses within that area. The document comprehensively covers all aspects of the franchise relationship, including initial and ongoing fees, operational standards, training requirements, intellectual property rights, and termination provisions. It's particularly important in Hong Kong's competitive market where territorial protection can be a crucial factor in franchise success. The agreement must comply with Hong Kong's Competition Ordinance while protecting both parties' commercial interests.
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1. Parties: Identification of franchisor and franchisee with full legal details
2. Background: Context of the agreement, nature of the franchise business, and intention of the parties
3. Definitions and Interpretation: Detailed definitions of terms used throughout the agreement
4. Grant of Franchise: Scope of franchise rights, exclusivity provisions, and territorial boundaries
5. Term and Renewal: Duration of the agreement and conditions for renewal
6. Franchise Fees and Payments: Initial fees, ongoing royalties, advertising contributions, and payment terms
7. Franchisor's Obligations: Support, training, and services to be provided by the franchisor
8. Franchisee's Obligations: Operational requirements, compliance with standards, and reporting obligations
9. Operations Manual: Reference to and compliance with the operations manual
10. Intellectual Property: Use of trademarks, copyrights, and other IP rights
11. Marketing and Advertising: Marketing requirements, advertising fees, and approval processes
12. Records and Audits: Record-keeping requirements and audit rights
13. Transfer and Assignment: Conditions for transfer of franchise rights
14. Termination: Grounds for termination and termination procedures
15. Post-Termination Obligations: Obligations after agreement ends including non-compete and confidentiality
16. Confidentiality: Protection of confidential information and trade secrets
17. Governing Law and Dispute Resolution: Applicable law and dispute resolution procedures
18. General Provisions: Standard boilerplate clauses including notices, amendments, and severability
1. Equipment and Inventory Requirements: Used when franchisor requires specific equipment or inventory purchases
2. Computer Systems and Software: Include when specific technology systems are mandatory
3. Multi-Unit Development: Used when franchisee has rights to develop multiple units
4. Training Requirements: Detailed section when extensive initial or ongoing training is required
5. Insurance Requirements: Detailed insurance section when specific coverage types are mandatory
6. Guarantee and Indemnity: Include when personal guarantees from franchisee's directors are required
7. Right of First Refusal: Include when franchisor wants rights to purchase franchise business
8. Force Majeure: Detailed provisions for handling unforeseen circumstances
1. Territory Description: Detailed description and/or maps of the exclusive territory
2. Initial Fees and Ongoing Payments: Detailed breakdown of all financial obligations
3. Equipment and Inventory Specifications: List of required equipment, furnishings, and inventory
4. Initial Training Program: Details of required initial training
5. Approved Suppliers: List of approved suppliers and products
6. Intellectual Property: Details of licensed trademarks and other IP
7. Form of Guarantee: Standard form of personal guarantee if required
8. Minimum Performance Requirements: Specific performance targets and metrics
9. Required Insurance: Detailed insurance requirements and minimum coverage
10. Transfer Documentation: Required forms and procedures for transfer of franchise
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