Buying a Franchise
Author:
Nicole Rockliff
Publish Date: December 7, 2006
Franchising is a type of business ownership which allows an individual, partnership or company to operate an independent business under the banner of an already established business.
Buying a franchise usually means a significant financial investment and therefore it is important to have all the relevant facts before you enter into a Franchise Agreement. For example, you should check the reputation, track record and financial stability of other franchisors very carefully before you consider entering into a franchise. You should also look at what advertising budget and backup services are offered by the franchisor.
The Franchising Code of Conduct ("the Code") came into force on 1 July 1998 and applies to all Franchise Agreements.
The Code provides that a franchisor must provide a disclosure document to a prospective franchisee at least 14 days before they enter into the Franchise Agreement or pay a non-refundable payment to the franchisor or an associate of the franchisor in connection with the proposed Franchise Agreement. The detailed information required to be included in the disclosure document is set out in the Code.
The Code also sets out certain conditions which govern the terms of the Agreement including a procedure for assignment, termination and dispute resolution. The Code also requires the franchisor to provide a 7 day cooling off period so that if the franchisee changes its mind within 7 days of signing the Franchise Agreement, it can get out of the Agreement. A Franchise Agreement is normally a lengthy written document outlining the rights of both the franchisor and the franchisee. It is a legal and binding Contract and therefore you should give careful consideration, on receipt of advice from your solicitor (and perhaps even your accountant) to the terms and conditions of the Franchise Agreement. It may be necessary to negotiate amendments with the franchisor to protect your rights and interests in the franchise.
For further information or assistance please contact Rockliffs on 02 9299 4912 or email us at lawyers@rockliffs.com.au