Essentially the relationship between the franchisor and
franchisee works as follows:
The franchisor sells the business kit /model to
independent partners, general in different countries
The franchisees form the franchise network and pays a fee
to form thereof
The franchisor seeks to duplicate as much as possible a
tried and tested successful business system
should follow and be guided by the franchise manual and other procedures and
rules and regulations set out by the franchisee
Types of Agreements
Product or Service Franchise - The
franchisor allows the franchisee to distribute goods utilising the
franchisor’s trademark .
Business Format Franchise – This is the
most common type of franchise, which involves not only the licensing of a
product or service, but a method for operating the business. Most of today’s
franchises combine both product and service and business-format franchises.
The franchisee completely identifies with and adopts the
manufacturer/supplier's product, service or trademark, marketing strategy,
operating manuals, standards, and quality control measures.
Licensing - The licensor grants to the
licensee a license to use patents, know-how and/or trademarks but does not
prescribe the manner in which the licensee conducts his/her business.
Distributorship- The manufacturer of a
product supplies the distributor with products at wholesale prices. The
distributor then resells the products to dealers or retails them directly to
the general public. The manufacturer does not prescribe the method for
operating a the business, but may provide training to improve selling
techniques and product knowledge.
Single Unit Franchise –
The franchisor grants the right to the franchisee to establish and
operate a business at a single location. This is the most popular
and simplest franchise format, especially for independent
entrepreneurs. (Most relevant for the Maltese scenario).
Area Franchise – Enables the franchisee to
establish more than one outlet within a certain territory.
Master Franchise – Enables
the franchisee not only to operate an outlet in a certain territory,
but also to sell sub-franchises to others within that territory.
Maltese law does not specifically regulate franchises or
franchise agreements, thus the importance of sound franchising arrangements
cannot be overstressed. Franchising arrangements involve a continuing
relationship between the franchisee and the franchisor and a legal contract
which outlines each party's responsibilities.
No mandatory elements are prescribed by Maltese law
concerning the form and content of a franchise agreement.
Such agreements fall under general contract law and anything regulating
contracts in general would usually be applicable in this case too.
It is also to be noted that there is no requirement under
Maltese law for the registration of a franchise agreement nor any provisions
addressing such registration.