How to Set Up an International Franchise in Australia
Want to open your own franchise in Australia? This article will outline what steps international franchisors should follow and the legal requirements.
Franchise business structures are widely popular in Australia, and more popular still, is bringing international brands onto Australian shores. In this article, we’ll outline how you can bring an international franchise to the Australian market.
What is franchising?
Franchising allows a business to operate under the established brand of another business. This means you can sell the brand’s products and market with their material. Despite this, the methods you use to increase sales are your responsibility. You can do this for a specified period by paying the franchisor a fee. Some important things to consider are where you’ll set up your franchise, how you’ll attract customers and what your options are if the business doesn’t take off.
International legal requirements
When considering international franchising, there are certain laws you must follow. First is The Franchising Code of Conduct. This is a mandatory industry code which applies across Australia. The aim of this is to regulate the conduct of franchising participants towards each other. Second is The Competition and Consumer Act 2010 (Cth). Any business that supplies goods to a consumer also needs to comply with this section.
A master franchise is where a franchisor licenses the rights of the business in a certain area. This can be a good option for international brands that want to find a local franchisor to start off. The master franchise acts as the head office of the franchisor for the designated area. The master franchisee determines where all the sub-franchisees will be built in their area, and also provides support and training.
Further, the types of businesses which often implement a master franchisee are fast food restaurants, real estate agents and convenience stores. A well-known example of this is Hungry Jacks in Australia, who’s franchisor internationally is Burger King.
1. Use a Franchise Agreement
To start off, you will need to implement a franchise agreement. This will inform all prospective franchisees about their rights. This agreement will need to comply with the Franchising Code of Conduct. Thus, it is important that your franchise agreement is consistent with the Code.
2. Disclosure document
If you are operating in Australia, you’ll be required to also have a disclosure agreement which needs to be updated every year. This agreement should provide a summary of your business, your history and further, the main points of how your franchise operates. This document aims to provide potential franchisees with adequate information about the franchise prior to entering a franchise agreement.
3. Register your trademarks
Intellectual property is a crucial part of any franchise. If a franchisee will be using your logo, brand name and other intellectual property, you should ensure it is first legally protected. You can register for a Trademark in Australia easily online or apply for a global one through the World Intellectual Property Organisation (WIPO).
4. Legal advice
If you are considering becoming a franchisee, you should always seek independent legal advice. Your lawyer should be able to inform you of the risks, benefits and also how you’ll be bound by the franchise agreement. Make sure you do this before you sign the agreement as when you do this, it will be legally binding.
Moving into the Australian market is a great opportunity for your franchise to grow. When expanding into Australia however, there are some legal and commercial considerations you’ll have to make, chiefly the Franchising Code of Conduct. If you have further questions about launching your franchise in Australia, it is recommended that you get in touch with a franchise lawyer.
Sheza is a legal intern at Lawpath. She is completing a Bachelor of Laws at Macquarie University. She is interested in corporate/commercial issues within the legal industry.