The Franchise Contract and Its Consequences

The Franchise Contract and Its Consequences PDF

Du'a Tareq Baker Al-Bishtawi

Supervisor(s)

Dr. Gahssan Sharif Khalid -

Discussion Commity

147 صفحة

Abstract :

Abstract The franchise contract, as an instrument that helps in economic and business development, is of great importance for it contributes to the creation of new jobs and development of the local workforce. Further, this contract is of great importance for its parties. It helps the franchisor, proprietor of the business, to expand his business activity without reducing his capital or borrowing money. In fact, he gets additional capital from an outside source –the franchisee who is given the right to sell the product or service in a certain area and uses the know-how and trade name of the franchisor. In this arrangement, the franchisor overcomes the complexity of running new outlets whose management requires a significant capital. At the same time, he will protect the quality of products or services to be produced or provided by the franchisee through a supervising system imposed by him, thus preserving reputation of his product or service. Another advantage is that the franchisor will get annual payments- known as royalties- from the franchisee. The franchisee gains from the arrangement as well. He uses the trade name of the franchisor and gets advice about running the business and takes advantage of the franchisor's specialized knowledge and ability to buy in bulk, thus saving a lot of his time, effort and securing success of his business. Given the importance of this subject, on the legal and practical levels, the researcher investigated the significant role which this type of business plays in the Palestinian nascent economy. This study is a serious endeavor to give a clear picture about the franchise agreement in the light of the dearth of sources which have tackled this type of business. This legal study falls into two chapters. Chapter one, divided into two sections, provided a definition of the franchise contract from a legal and juristic perspective. The researcher also traced the historical development of this type of business contract and the laws governing it. The chapter then moved to give more definitions pertinent to the franchise contract. In addition to providing simple examples to illustrate this contract, the researcher detailed types of this contract and the different forms of its management. She also specified the characteristics of this contract, its importance and advantages for both sides: the franchisor and the franchisee. However, she also highlighted the disadvantages of its implementation and tackled its legal nature. And also held a comparison between this contract and another four contracts: trade concession contract, license contract (using the trade name) the sales representative contract and the trade agency contracts. In addition, the researcher discussed the opinion which maintains that the franchise contract is itself a trade concession. In this respect, the researcher explained the areas of differences between them and highlighted the jurists' opinions which upholds or supports independence of each of them. The researcher herself tilts towards this opinion. The researcher concluded that this contract is an independent system and is different from other similar contracts and acts. It combines characteristics of numerous contracts and acts but remains independent of all of them. It enjoys certain characteristics which necessitate that it has its own rules, prescriptions and terms. The researcher also dwelt on the nature of the franchise contract by illustrating the particularism of the subject in the contract. After briefly giving an explanation of the elements of the contract, the chapter ended with a look at its ratification. Chapter two was devoted to the consequences of the franchise contract. In one section, the researcher dwelt on the obligations of the franchisor and the franchisee. In another section, she focused on the reasons for the termination of the contract and consequences of its termination. In the light of the study findings, the researcher suggests that the Palestinian lawmaker enacts a new legislation for the franchise contract that suits it, helps in its development and promotes dealing in it. In this regard, the researcher has suggested a number of legal texts to govern it. The researcher also recommends renaming the franchise contract as the Trade Name Utilization Contract.

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