Franchise Agreements and Proprietary Products
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A franchisor must stipulate to be franchised outlets throughout the system the conditions for which all proprietary products are used and how all proprietary equipment use used and purchased.
A franchisor must stipulate to be franchised outlets throughout the system the conditions for which all proprietary products are used and how all proprietary equipment use used and purchased. These stipulations must be addressed during training and confidential operations manual, however be really smart franchise company, will address this issue prior to the commencement of new franchise outlets by inserting a clause into the franchise agreement.
If for instance a company has a certain type of machine that makes donuts, the franchise or does not want his franchisee to be selling that equipment for a higher price on eBay. It is for this reason that in my franchise company, we determined that a clause should be put into the franchise agreement. Below is a clause I came up with;
3.13 Proprietary Products
In order to maintain the high standards of quality associated with The Car Wash Guys System, Franchisee must purchase Proprietary Products or equipment from Franchisor or a person designated by Franchisor referred to in Section 4.5. Franchisee must not alter, amend or modify any of such Proprietary Products or equipment or use any other products instead of the Proprietary Products or equipment without the written authorization of the President of the Franchisor.
Franchisee will not resell The Car Wash Guys, Wash Guys or Franchisor’s supplies.
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Any franchisor worth their salt would be advised to contact the franchise attorney to determine if such a clause in the franchise agreements would assist them in maintaining consistency and control of proprietary equipment and products. Please consider this in 2006.
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