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.
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