The Sub Franchise Agreement is a crucial document used in multi-tiered franchise structures in South Africa, where a master franchisee has been granted rights to sub-franchise the business concept within a specific territory. This agreement is essential when expanding franchise networks through local partners while maintaining brand consistency and operational standards. The document must comply with South African legislation, particularly the Consumer Protection Act, which provides specific requirements for franchise agreements. It typically includes detailed provisions for operational standards, financial obligations, territory rights, intellectual property usage, and support services. The agreement ensures that the sub-franchisee's operations align with both the master franchise agreement and local regulatory requirements while protecting the interests of all parties involved in the franchise structure.
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1. Parties: Identification of the master franchisee (sub-franchisor) and sub-franchisee, including full legal names and registration details
2. Background: Context of the agreement, including reference to the master franchise agreement and authority to grant sub-franchises
3. Definitions and Interpretation: Detailed definitions of terms used throughout the agreement and rules of interpretation
4. Grant of Sub-Franchise: Terms of the sub-franchise grant, including territory, exclusivity, and term of agreement
5. Franchise System: Description of the franchise system, including use of trademarks, know-how, and operating procedures
6. Fees and Payments: Details of initial fees, ongoing royalties, marketing contributions, and payment terms
7. Sub-Franchisor Obligations: Obligations of the master franchisee including training, support, and oversight
8. Sub-Franchisee Obligations: Detailed responsibilities and commitments of the sub-franchisee
9. Training Requirements: Initial and ongoing training requirements and procedures
10. Operating Standards: Required operational standards, quality control, and compliance requirements
11. Intellectual Property: Use and protection of trademarks, copyright, and other intellectual property
12. Marketing and Advertising: Marketing requirements, restrictions, and cooperative advertising programs
13. Records and Reporting: Required financial records, reports, and inspection rights
14. Transfer and Assignment: Conditions and restrictions on transfer of the sub-franchise rights
15. Termination: Grounds for termination, procedures, and consequences
16. Post-Termination Obligations: Obligations and restrictions after agreement ends
17. Dispute Resolution: Procedures for handling disputes, including mediation and arbitration
18. General Provisions: Standard legal provisions including notices, governing law, and entire agreement
1. Development Schedule: Include when the sub-franchisee has obligations to open multiple units over time
2. E-commerce Rights: Include when online sales or digital presence needs to be regulated
3. Supply Chain Requirements: Include when there are specific supplier relationships or requirements
4. Sub-Sub-Franchising Rights: Include if the sub-franchisee is permitted to grant further sub-franchises
5. Competition Restrictions: Include when additional non-compete provisions are needed beyond standard terms
6. Force Majeure: Include detailed force majeure provisions when operating in volatile markets
7. Environmental Compliance: Include when business operations have significant environmental impacts
8. Data Protection: Include detailed POPIA compliance provisions when significant personal data processing is involved
1. Territory Description: Detailed description and/or maps of the granted territory
2. Initial Fees and Ongoing Payments: Detailed breakdown of all financial obligations
3. Equipment and Fit-out Specifications: Required equipment, furniture, and premises specifications
4. Operating Manual Table of Contents: Overview of the operating manual contents (full manual provided separately)
5. Training Program: Detailed initial and ongoing training requirements and schedules
6. Approved Suppliers: List of approved suppliers and products
7. Intellectual Property Register: List of trademarks, copyrights, and other IP included in the franchise
8. Required Insurance: Details of required insurance coverage and limits
9. Form of Personal Guarantee: Standard form of personal guarantee if required
10. Disclosure Document: Franchise disclosure document as required by Consumer Protection Act
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