HEADS OF TERMS
These Heads of Terms (the "HOT") are entered into as of _____________ between:
Franchisor: _____________________________________________ ("Franchisor") — the party granting the franchise licence; and
Franchisee: _____________________________________________ ("Franchisee") — the party receiving the franchise licence.
These Heads of Terms record the principal commercial terms agreed between the Parties and are intended to form the basis of a formal Franchise Agreement to be negotiated and executed in good faith. Unless expressly stated otherwise, these Heads of Terms are non-binding, save for clauses 10 (Exclusivity and No-Shop), 11 (Confidentiality), and 12 (Governing Law), which shall be legally binding upon signature.
1. Franchise Concept and System
The Franchisor has developed a proprietary trade facilitation and commercial intermediary business system (the "Franchise System") comprising operational methodologies, brand standards, client engagement protocols, technology platforms, training programmes, and commercial networks.
The Franchise System is described in the Franchisor's Operations Manual (the "Manual"), as updated from time to time, and such description shall form part of the definitive Franchise Agreement.
The Franchisee acknowledges that the Franchise System constitutes proprietary and confidential intellectual property of the Franchisor, and that no right to the Franchise System is transferred to the Franchisee other than the limited licence described in these Heads of Terms.
2. Licensed Territory
The Franchisor proposes to grant the Franchisee the exclusive right to operate the Franchise System within the following territory: _____________________________________________ (the "Licensed Territory").
The Franchisee shall not actively market or solicit business from outside the Licensed Territory without the prior written consent of the Franchisor. Passive enquiries received from outside the Licensed Territory shall be referred to the Franchisor for allocation.
Exclusivity within the Licensed Territory shall be subject to the Franchisee meeting minimum performance targets as specified in the definitive Franchise Agreement.
3. Franchise Fee and Costs
Initial Franchise Fee: _____________ payable upon execution of the definitive Franchise Agreement.
The Initial Franchise Fee covers: initial training (_____ days), access to the Manual, onboarding support, and initial marketing materials. It is non-refundable once paid.
The Franchisee shall be responsible for all costs associated with establishing its office or operational presence within the Licensed Territory, including but not limited to premises, equipment, staffing, legal and accounting fees, and any required regulatory licences or registrations.
Estimated minimum initial investment by the Franchisee (excluding the Initial Franchise Fee): _____________ to _____________.
4. Ongoing Royalties and Fees
Monthly Management Fee: _____ per cent of the Franchisee's gross revenue from all transactions facilitated under the Franchise System, payable monthly in arrears within fifteen (15) days of month-end.
Marketing Fund Contribution: _____ per cent of gross revenue per month, payable to the Franchisor's central marketing fund.
Technology and Platform Fee: _____________ per month, covering access to the Franchisor's proprietary systems, CRM, and data platforms.
All royalties and fees shall be calculated on the basis of monthly management accounts provided by the Franchisee, subject to audit rights retained by the Franchisor.
5. Commission Sharing on Cross-Territory Transactions
Where a transaction is originated by the Franchisor or another franchisee and referred to the Franchisee for execution within its Licensed Territory, commission shall be split as follows: _____ per cent to the originating party and _____ per cent to the executing party (the Franchisee), unless otherwise agreed in writing on a case-by-case basis.
Where a transaction is originated by the Franchisee and executed outside its Licensed Territory with the assistance of the Franchisor or another franchisee, the same split shall apply in reverse.
6. Training and Ongoing Support
Initial Training: The Franchisor shall provide _____ days of initial training at a location agreed between the Parties, covering the Franchise System, compliance protocols, client engagement methodology, documentation frameworks, and technology platform.
Ongoing Support: The Franchisor shall provide the Franchisee with ongoing support including access to the Franchisor's principal network, monthly group calls, annual franchise summit, and updates to the Manual.
Additional training required by the Franchisee beyond the initial programme shall be provided at rates specified in the definitive Franchise Agreement.
7. Brand Standards and Operational Compliance
The Franchisee shall operate the Franchise System in strict compliance with the Manual, brand standards, and all applicable laws and regulations of the Licensed Territory.
The Franchisor shall have the right to conduct compliance audits of the Franchisee's operations at any time on reasonable notice, and to inspect client files, documentation, and financial records related to the Franchise System.
Any material breach of brand standards or operational requirements that is not remedied within _____ days of written notice shall be grounds for termination under the definitive Franchise Agreement.
8. Intellectual Property
The Franchisor grants the Franchisee a non-exclusive, non-transferable, revocable licence to use the Franchisor's trade marks, trade names, logos, and other intellectual property solely within the Licensed Territory and solely in connection with the operation of the Franchise System during the term.
The Franchisee shall not register, or attempt to register, any trade mark, domain name, or company name incorporating the Franchisor's intellectual property without the Franchisor's prior written consent.
Any goodwill generated through the use of the Franchisor's intellectual property shall accrue to the Franchisor.
9. Term and Renewal
Initial Term: _____ years from the date of execution of the definitive Franchise Agreement.
Renewal: The Franchisee shall have the right to renew for successive terms of _____ years, subject to: (a) compliance with the Franchise Agreement throughout the preceding term; (b) meeting minimum performance targets; (c) execution of the then-current form of franchise agreement; and (d) payment of a renewal fee of _____________.
The Franchisor shall give the Franchisee not less than _____ months' written notice before the expiry of any term if the Franchisor does not intend to offer renewal.
10. Exclusivity and No-Shop (Binding)
From the date of signature of these Heads of Terms until the earlier of: (a) execution of the definitive Franchise Agreement; or (b) _____ days from the date hereof (the "Exclusivity Period"), the Franchisor shall not negotiate, enter into, or conclude any franchise agreement, territorial licence, or similar arrangement with any third party in respect of the Licensed Territory. During the Exclusivity Period, the Franchisee shall not negotiate or enter into any franchise or territorial licence arrangement with any other trade facilitation network in the Licensed Territory. This clause is legally binding.
11. Confidentiality (Binding)
Each Party shall keep confidential the terms of these Heads of Terms and all information exchanged in connection herewith, and shall not disclose such information to any third party (other than professional advisers on a need-to-know basis) without the prior written consent of the other Party. This obligation shall survive the expiry or termination of these Heads of Terms for a period of two (2) years. This clause is legally binding.
12. Governing Law (Binding)
These Heads of Terms, and any dispute arising out of or in connection herewith, shall be governed by and construed in accordance with the laws of _____________________________________________. This clause is legally binding.
13. Next Steps
Subject to satisfactory completion of due diligence by both Parties, the Parties intend to proceed as follows:
Exchange of due diligence information and financial disclosure within _____ days of the date hereof;
Franchisor to provide draft definitive Franchise Agreement within _____ days of satisfactory due diligence;
Target date for execution of definitive Franchise Agreement: _____________.
14. Non-Binding Nature
Save for clauses 10, 11, and 12, these Heads of Terms do not constitute a legally binding agreement and do not oblige either Party to enter into the definitive Franchise Agreement. Either Party may withdraw from negotiations at any time prior to execution of the definitive Franchise Agreement without liability to the other Party, save in respect of breaches of the binding clauses above.
AGREED AND SIGNED
Signed by the Parties as confirmation of the commercial terms recorded herein.
For and on behalf of the Franchisor:
Authorised Signatory: _____________________________________________
Full Name: _____________________________________________
Title: _____________________________________________
Date: _____________________________________________
For and on behalf of the Franchisee:
Authorised Signatory: _____________________________________________
Full Name: _____________________________________________
Title: _____________________________________________
Date: _____________________________________________
Doc 04 — Franchise Agreement (Heads of Terms) — Neutral Template