Currency Exchange Rates and International Franchising

For those franchising businesses, which do business globally, they need to consider money exchange rates from the states where they do business.

It’s for this reason I’d determined to add a clause in to our global franchise arrangements, that addressed this very problem under;

2.6 Money

All payments because of Franchisor under this Agreement will be produced in U.S. Dollars. Any payments or fees could be computed and determined from the money where the receipts are denominated. However, payment of such penalties shall be created in U.S. Dollars predicated upon the “Exchange Rate” in effect as of the final day of the date on which such payments or fees are expected. As employed herein, “Exchange Rate”¬†shall mean the speed of exchange of the money where Gross Receipts of this Location are denominated and U.S. Dollars, as printed in the USA version of The Wall Street Journal to the following working day after the final day of the calendar month to which a payment or fee is expected.

At the event a payment has been sent after the payment is expected, the money exchange rate used will be the Exchange Rate as of the date payment was due or the Exchange Rate as of the date that the payment is sent, whichever rate generates the bigger sum in U.S. Dollars, and no matter the Late Payment (as described in Section 2.5 above) or of any alternative for non-payment or premature payment of amounts due pursuant to the Agreement.

Believe it or not, some global franchise agreements don’t have such a clause in them and for all those franchising businesses it may be too late to include such a clause after the actuality. It’s because of this I urge any firm considering franchising globally to see a global franchising lawyer who has dealt with these kinds of things. I hope you’ll consider that in 2006.

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