Franchising is a business model, where usually the Franchisor (or owner) controls the name, brand and system of the business and grants the Franchisee the right to operate a franchise business for a set period of time.
Franchisors and Franchisees must comply with the Franchising Code of Conduct, which sets out requirements for a franchise or specific information to be provided to a Franchisee.
A Franchise Agreement is a legally binding contract, which sets out the terms of the franchise.
The following questions are the most commonly asked by our clients when considering franchising.
A franchise can offer some significant benefits to the Franchisee, such as an established product or service, existing reputation and intellectual property. It may also provide the Franchisee with the Franchisor’s support, experience and knowledge in the industry, business planning, marketing and business reputation.
A potential Franchisee should make its own enquiries and carefully consider whether the franchise system will suit their needs. The Franchisor may have an established business and operation systems in place which the Franchisee will be required to comply with to maintain consistency. As a result, the Franchisee may be restricted from making any changes to the franchise business without the agreement of the Franchisor. The Franchisor may also make changes to the franchise system, update computer systems and make other changes to the franchise business at their discretion at the Franchisee’s cost.
- Due Diligence – research and investigate the franchise system, talk to current and former Franchisees
- Legal, accounting and/or business advice from professionals with expertise in franchising
- The Disclosure document, Franchise Agreement and any other documents provided by the Franchisor
- You may be required to complete a specialist franchising or business course
- Investigate demand for products or services in the geographical area you wish to operate
- Consider exclusive territory – what area does it cover
- Review terms and conditions of the Franchise Agreement, particularly termination provisions, your rights and responsibilities around renewing your Franchise Agreement, future sale of your business, restrictions on starting of a similar business and fit out costs.