Foreign investors who want to open a company in Singapore have several options. Even if most of them set up new companies because of the financial assistance granted by the state, there are also other forms of doing business in Singapore, such as taking over an existing idea and building around it. This is called franchising and is widely spread all over the world.
Singapore does not have a specific legislation governing franchises, however, the Contract Law provides for the main elements when establishing this type of venture in the city-state and what the franchising contract must contain.
Our Singapore company formation consultants can assist enterprisers who want to start franchise businesses here.
We also invite you to watch our video on how to set up a franchise in Singapore:
Elements of the franchise in Singapore
There are 3 main elements which determine the structure of a franchise in Singapore:
- – the company selling the rights for the franchise, also known as the franchisor;
- – the entrepreneurs buying the rights for the franchise, also known as the franchisee;
- – the above-mentioned franchise agreement which is a contract signed by the franchisor and the franchisee.
It should be noted that starting a franchise business implies company registration in Singapore. The most employed structure is the limited liability company, however for smaller businesses, the sole proprietorship is also an option.
If you are interested in setting up a company in Singapore, you should consider a number of factors. Our advisors can provide useful information on some of the most important things you should be aware of. We are also at your disposal with tailored solutions in terms of activities you can undertake, as well as tax-related matters. Our company formation experts in Singapore can assist with the incorporation of the chosen form.
Rights and obligations of the franchisor and franchisee in Singapore
The role of the franchise agreement is to establish the rights and obligations of the parties involved in the Singapore franchise company.
The franchisor has the following obligations and rights:
- – the obligation to provide the franchisee all the know-how related to the business;
- – the obligation of ensuring the franchisee and his or her staff have access to training;
- – the right to be compensated for granting the franchisee to use the rights over the business.
The compensation can take the form of royalties or a compensation paid upon certain terms.
The franchisee, in return, has the following obligations:
- – to respect the content of the franchise agreement;
- – to use the technology put at his or her disposal just as required by the franchisor;
- – to come with the location for the franchise;
- – to pay the royalties or other compensations as prescribed in the agreement.
The holder of a franchise license in Singapore also has the right of using the trademark of the franchise and is entitled to profits from this use.
Starting a franchise business in the Lion City has many benefits which can be explained by our company formation representatives in Singapore, so do not hesitate to contact us.