A franchise agreement should do more than attach a brand name to a business. It should say who may use the system, in which territory, to what standard, for how long and what happens if the relationship ends. Where a foreign provider supplies the franchise system, it must also fit the technology-transfer approval analysis.
This is a contract-content guide. For the route into the business, use the franchise registration guide.
Start with the correct parties and territory
Name the legal owner of the system and the Nepal operating recipient precisely. Identify any permitted sub-franchising, the address or territory covered, excluded channels and the rules for expansion. These are commercial design choices, but vague party or territory language can make the brand, fee and termination provisions hard to operate.
If the provider is foreign and the Nepal recipient is an industry receiving a franchise, know-how, trademark or related services, assess FITTA before treating the agreement as a purely private contract. FITTA’s technology-transfer definition expressly includes franchise.
The clauses that do the practical work
| Clause | What it should settle |
|---|---|
| Brand and IP licence | The marks, materials, manuals and uses authorised in Nepal; ownership remains with the stated owner unless the agreement says otherwise. |
| Operating standards | Manuals, training, supply standards, audit/quality review and change-control process. |
| Fees and records | Initial and recurring consideration, invoicing basis, currency, taxes, records and what happens to disputed amounts. |
| Confidential know-how | Who may access the system, permitted disclosures and return/destruction of materials. |
| Term and renewal | Start date, conditions for renewal and what must be agreed again rather than assumed. |
| Termination | Notice, cure rights where appropriate, handover, brand de-identification, stock and post-termination use. |
| Disputes and governing law | Escalation, forum or arbitration wording, notices and the law intended to govern the contract. |
IP, quality control and the end of use
The agreement should distinguish permission to use a mark from ownership of the mark. It should identify approved logos and materials, control alterations and establish who can approve local advertising. A quality-control mechanism is usually a commercial safeguard: it gives the owner a way to protect consistent use without leaving the operator to guess.
Plan the exit at the same time. Specify whether signs, domains, manuals, online listings, uniforms, packaging and confidential materials must be removed, returned or destroyed, and how long any sell-down is allowed. The trademark licensing guide covers the franchise-specific IP questions.
Fees, royalties and tax records
Avoid a fee clause that simply says “royalty as agreed.” State the calculation basis, reporting period, invoicing, currency, audit access and treatment of tax. A foreign technology-transfer agreement needs terms that fit FITTA: section 7 says the agreement must state its terms and may not provide royalty repatriation above the prescribed ceiling. Do not insert a percentage from an outdated checklist or assumption.
For an outward technology-transfer royalty, the eventual NRB evidence list includes the approved agreement, DOI approval letter, invoice and certified-auditor statement. Draft the payment clause so the documents the parties will create can remain consistent with the approval file. See franchise royalty and repatriation for the payment stage.
What changes for a foreign franchise
DOI’s published technology-transfer service materials require a prescribed application and original agreement, alongside the recipient’s industry documents, decision/authority records and provider documents appropriate to whether the provider is an individual or company. A foreign agreement should therefore be final enough to explain the transaction, but not rushed into performance before the approval position is clear.
The current DOI Citizen Charter lists technology-transfer approval as a 3–7 day administrative service standard, free of charge. That is not a promise that the contract, sector permissions, banking or remittance will complete in that period.
Drafting checklist before signature
- Confirm the legal parties, ownership chain and Nepal operator.
- List every mark, manual, process, training and service being provided.
- Specify permitted use, controls, fees, records, term and exit obligations.
- Check whether the foreign technology-transfer/DOI route applies before performance begins.
- Reconcile the agreement with the DOI application and any future invoice/remittance records.
- Obtain advice on sector, competition, tax and enforceability issues that depend on the transaction.
Official Sources and Further Reading
- Foreign Investment and Technology Transfer Act, 2019 — sections 2(f) and 7.
- DOI Foreign Investment and Technology Transfer Section
- DOI Citizen Charter — technology-transfer service row.
- DOI Technology Transfer Rules page
- DOI Industrial Property Section
