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 Australian Legal Innovation Index and recently a winner of the LexisNexis 40 Under 40 (APAC).
💡 Key insights
- Becoming a franchisee means buying the rights to operate a business under an established brand and proven system in exchange for ongoing fees and adherence to the franchisor’s operating rules.
- Before signing a franchise agreement you should carefully review the disclosure document, seek independent legal and financial advice, and understand your rights and obligations under the contract.
- Franchisees must be prepared for ongoing costs such as franchise fees, marketing contributions and compliance with the franchisor’s standards which can affect profitability.
- Knowing the termination, renewal and dispute resolution provisions in the franchise agreement is essential because these terms shape your long term control and exit options for the business.
On 1 January 2015, the new Franchising Code of Conduct came into effect. Here are some of the points you should take note of as a franchisee.
What are your rights?
The franchisor (the owner of the business) must disclose any essential information to help you make an informed decision when buying the franchise. That obligation does not end at the negotiation stage. During the course of the franchise relationship, the franchisor must also disclose to you if a materially relevant fact occurs. This includes a change in franchise system, majority ownership or control of the franchisor, and court proceedings against the franchisor or its directors.
Both parties must exhibit good faith when dealing with each other. Indicators of good faith include being honest with each other, considering each other’s interests, and working out your differences.
What are your obligations?
Most of your obligations to your franchisor will be documented in the terms of your Franchise Agreement. It is important to understand your obligations and how it affects your relationship with your franchisor. Be sure to read them carefully!
If I signed the Franchise Agreement but I don’t want buy the franchise anymore, what do I do?
It is important to read the terms of your Franchise Agreement carefully before signing anything.
However, do not worry if you had a change of mind after signing the agreement. There is a cooling-off period of 7 days. You are entitled to terminate a new franchise agreement within 7 days of entering into the agreement or make a payment under the agreement, whichever comes first.
I think that my Franchise Agreement is unfair. Can I terminate it?
Generally, Franchise Agreements can be terminated in several circumstances – the Franchise Agreement being unfair is one of them.
Other circumstances where a Franchise Agreement can be terminated include if a party breaches or goes back on the agreement, if you entered into the agreement as a result of misrepresentation, or if the agreement is unlawful.
For the Franchisor’s Compliance Manual
For the Franchisee Manual
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