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of franchising, the franchisor does not provide the franchisee with an
entire system for running its business.
On the other hand, business format type of franchising provides
the franchise with the opportunity to use of a franchisor’s products,
services and trademarks, as well as the system and know-how to con-
duct the business.
Elements
The main elements of the franchise agreements can be considered
as follows:
(i) The independency of the franchisee from the franchisor (the
franchisee’s ability to act on its own behalf and for its own
account, independently from the franchisor);
(ii) Know-how utilization in the relevant business system and
integration of products and/or services;
(iii) Uniform appearance of trademarks and logos on business
items;
(iv) Payment of a royalty fee;
(v) The franchisee’s obligation to increase the sales; and
(vi) Permanence.
As indicated above, the use of know-how or to license a trademark
constitutes one of the main features of franchise agreements. In case
the franchise agreements does not include the use of know-how in the
production, operation and marketing system, it is highly likely that the
agreement not be construed as a franchise agreement but a different
form of contract, depending on its contents: For example, in a perma-
nent sale and distribution type of agreement, if the title to the products
passes from the principle to an intermediary, yet the contract does not
involve transfer/use of know-how, then such agreement may be
construed as a distributorship agreement. If the title to the products
shall remain with the principle, yet the contract does not involve
transfer/use of know-how, then such agreement shall be construed as
an agency agreement.
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287