Posted by: Tom Wood | Date: 11 April 2013
Franchised businesses differ from other businesses in a number of ways. They offer the ability to run your business using the franchisor’s “system” in a way that allows you to gain benefit from the name, marks, brand, image, and general “know-how” of a well established and generally more expansive organisation.
Whilst operating a franchised business provides you with a great number of benefits, there are also a number of pitfalls that you need to look out for when entering into a franchise agreement.
Franchising in Australia is governed by the provisions of the Franchising Code of Conduct (“the Code”) which regulates the conduct of both franchisors and franchisees. It also provides penalties for non-compliance.
The Code requires that at least 14 days before you enter into the franchise agreement or make a non-refundable payment to the franchisor, the franchisor must provide you with a copy of the following documents:
The Disclosure Document is designed to provide you with information about the franchise so that you can make an informed decision as to whether or not you wish to enter into a franchise agreement with the franchisor.
Although it is important that you consider all of the information contained within a Disclosure Document, I generally advise my clients to pay attention to the following:
Your franchise agreement is just like any other contract and as such it is imperative that you read it and fully understand it before signing it. You should pay particular attention to the following:
Entering into a franchise agreement is a significant undertaking. It is essential that anyone considering entering into a franchise agreement seeks legal advice before doing so.
Please contact me if you have any questions regarding a franchised business, or franchising in general.