For these franchising firms, which do enterprise internationally, they have to contemplate foreign money trade charges within the nations during which they do enterprise. Otherwise giant fluctuations in foreign money devaluations could cause enormous issues within the franchisor’s money movement.
It is for that reason that I had determined so as to add a clause into our worldwide franchise agreements, which addressed this very difficulty under;
2.6 Currency
All charges, royalties and different funds referenced on this Agreement are said within the foreign money of the United States of America (“U.S. Dollars”). All funds attributable to Franchisor underneath this Agreement shall be made in U.S. Dollars. Any charges or funds could also be calculated and decided within the foreign money during which the receipts are denominated. However, fee of all such charges shall be made in U.S. Dollars primarily based on the “Exchange Rate” in impact as of the final day of the date on which such charges or funds are due. As used herein, “Exchange Rate” shall imply the speed of trade of the foreign money during which Gross Receipts of the Location are denominated and U.S. Dollars, as printed within the United States version of The Wall Street Journal on the following enterprise day following the final day of the calendar month for which a charge or fee is due.
In the occasion a fee is transmitted after the date fee is due, the foreign money trade fee used shall be the Exchange Rate as of the date fee was due or the Exchange Rate as of the date the fee is transmitted, whichever fee produces the bigger quantity in U.S. Dollars, and no matter any Late Payment (as outlined in Section 2.5 above) or of another treatment for non-payment or premature fee of sums due pursuant to this Agreement. Franchisee shall be accountable for acquiring and sustaining any and all needed or applicable governmental approvals or permits enabling Franchisee to make funds to Franchisor in U.S. Dollars.
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Believe it or not, some worldwide franchise agreements wouldn’t have such a clause in them and for these franchising firms it may be too late so as to add such a clause after the very fact. It is for that reason that I like to recommend any firm contemplating franchising internationally to go see a world franchising lawyer who has handled such issues. I hope you’ll contemplate this in 2006.
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