So You’re Thinking of Being a Franchisor? Here’s What You Need to Know
Looking to expand your business? Learn about the obligations of being a franchisor and move your business in the right direction.
A franchisor is an entity that allows another entity to run a location of their business.
What are my obligations?
While most franchisor obligations are governed by the Franchise Agreement, there are several legislative obligations you need to look our for.
- Disclosure: You will be required to provide a disclosure document to a potential or current franchisee at least 14 days before they enter into, renew or extend a franchise agreement. Further, if a materially relevant event occurs, like a change in ownership or a director of your business getting sued, you need to inform your franchisees. Here is a model disclosure document for you to take a look at. You may be required to update your disclosure document within four months after the end of each financial year. See the Franchisor Compliance Manual for more information.
- Good Faith: You are required to “act reasonably and not exercise your powers arbitrarily or for some irrelevant purpose”. This includes being honest, considering the franchisee’s interests and working out your differences.
- Lease: If a franchisee leases premises from you for their franchise, you must give them a copy of the lease or agreement to lease within one month after the document is signed, including details of any incentive or financial benefit you will receive as a result of the agreement.
- Termination: You need to provide reasonable written notice of intention to terminate a Franchise Agreement if the franchisee breached it and allow time for the franchisee to remedy the breach.
What are my rights?
Most of your rights as a Franchisor will be governed by a Franchise Agreement. This may include the right to a management service fee or royalties for the franchisee to use the marks, images and systems of the Franchisor.
Here is a full run down of your rights and obligations.
Unsure where to start? Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or to get answers to your legal questions.
Dominic is the CEO of Lawpath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the 2015 Australian Legal Innovation Index.