5.1 The Franchisee shall conduct its activities as an independent business operator, for its own risk and on its own account13. The Franchisee shall indicate its status as an independent business on all business documents.

The franchisee’s independence is a basic characteristic of franchising. However, since the network is strongly characterized by the image of the franchisor, customers of the franchisee may be induced to confuse the franchisee and franchisor and consequently invoke the responsibility of the franchisor for debts of the franchisee (e.g. liability towards customers or employees). It is therefore important on one side to check such risk under the applicable law and also to take all possible precautions (on all documents used by the franchisee) showing its position as independent contractor.

5.2 The Franchisee is neither an employee, agent or sales representative, nor partner of the Franchisor and nothing in the Contract can be construed as meaning such.

This clause makes clear that the parties do not intend to establish a relationship as «employer employee » or “«principal-agent». However, this may not be sufficient to exclude the existence of an employment contract in cases where the franchisee works under close control of the franchisor and his freedom to organize his business is very limited (depending in any case on the applicable law). The risk of falling under an employment contract is normally very low if the franchisee is a company or a partnership. In some countries a declaration of the social security authorities can ensure that the franchisee is not considered an employee. If the franchisee resells goods, it should in principle not be considered as a commercial agent. However, in certain countries (e.g. Austria and Germany) courts may apply by analogy the rules on agency (and particularly the rule on goodwill indemnity) to franchisees who assume obligations which are similar to those of a commercial agent.

In some common law countries it may be appropriate to add a clause stating that that the franchisor has no fiduciary duty to the franchisee.

5.3 The Franchisee shall not hold itself out as having any power or authority to enter into contracts in the name of the Franchisor, to commit the Franchisor in any way to any third parties or to incur any obligation on behalf of the Franchisor, except as is expressly prescribed by the Franchisor.

5.4 The Franchisee shall operate the Business in compliance with all applicable laws and regulations and shall apply for, obtain and have renewed all permits, authorizations and licences required for the operation of the Business at its own expense.

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It is critical for the franchisor entering a new foreign market for the first time to thoroughly research the national and local legal requirements that affect the offer and sale of a franchise, the ongoing franchise relationship, the general operation of a business and, in particular, any special national or local regulations which will affect the operation of the franchisor’s specific business format or underlying industry. Laws that may affect operations may be regulatory in scope, such as environmental, labor and employment or antitrust laws, or may be more local in nature, such as special governmental approvals, examples including land use and zoning requirements or health and safety permits.

5.5 If the Franchisee is a legal entity, any change in ownership without the written consent of Franchisor shall be deemed to constitute a substantial breach of contract which may result in immediate termination of this Contract under Article 26.1. Such consent shall not be unreasonably withheld, especially where the change of ownership in no way affects the Franchisee’s ability to perform its contract obligations.

13
This sentence may not be 100% correct in cases where the franchisee has a consignment stock of Franchisor's products and is selling them in his own name but on behalf of the franchisor under a commission contract (contrat de commission).