In a franchise business, a franchisor licenses a franchisee to use its registered trademark, corporate logo, patents, proprietary technology and other business resources. The franchisee carries on business according to the standard business model of the franchisor and pays a franchise fee in accordance with a franchise contract.
In practice, however, the parties to a franchise contract often do not fully understand the initial fees, royalties and deposits that are provided for in the contract they have signed. This may trigger disputes.
By analysing a case of this nature, this article attempts to discern the true legal meaning of franchise fees, with a view to facilitating the prevention and settlement of franchise contract disputes.
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Harry He is a partner of AllBright Law Offices. His main practice areas are foreign direct investment, M&A and labour disputes.
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