Franchising Law
We have extensive experience in franchising law, acting for both franchisors and franchisees operating in various franchise industries. We can assist with:
- Preparing disclosure documents and franchise agreements
- Legal structures for your franchise business
- Advising on legal strategies for domestic and international franchise growth, including territory protection and compliance with international franchising laws
- Assisting with trademark registration and enforcement to safeguard your brand and proprietary systems
- Retail and commercial leasing for operating a franchise business Advising on franchise matters such as breaches, renewals, and terminations
- Franchise disputes including advising in respect of litigation and alternative dispute resolution
Franchise Arrangements in Australia
A franchise is an arrangement whereby the owner of a branded product or service (the franchisor) assigns to an independent third party (the franchisee) the right to sell that product or service using the franchisor’s trademark/brand.
The franchisee runs the franchise business through its own business entity but generally operates using the franchisor’s systems. The arrangement usually entitles the franchisee to access the franchisor’s standard procedures, administrative and marketing systems, and training.
Franchises in Australia are regulated by the Franchising Code of Conduct which governs specific aspects regarding the sale, purchase and operation of franchises and provides important protections for franchisees.
The Franchise Agreement
The franchise agreement outlines the terms and conditions of the franchisor-franchisee relationship. It establishes the rights and obligations of each party and covers matters such as the use of the franchisor’s trademark, the products and services that can be offered, product pricing, supplier arrangements, advertising, marketing, and the fees and royalties that must be paid. Most agreements will include provisions regarding the territory/location for the franchise, confidentiality, and protection of intellectual property.
Due Diligence for Franchisees
Potential franchisees should carefully review and understand a franchise agreement before signing and we recommend engaging an experienced lawyer to review the agreement and associated documents. We can explain your rights and obligations under the agreement, flag potential issues or concerns and may be able to negotiate provisions that better align with your interests.
The term of the agreement and specific requirements regarding the location of the franchise business, restrictions, or obligations on the franchisee’s choice of supplier and any prohibitions regarding online selling should also be addressed.
All costs must be factored into your decision-making, and it is recommended that you consult an accountant to assist with the financial and cash-flow aspects of the business. You will need to consider the initial franchise fees, royalties, advertising and marketing costs, accounting, and legal fees. Additionally, you should factor in the costs of securing and leasing suitable premises and any associated fit-out costs, approvals, council fees, and operational costs such as wages and training.
Disclosure Documents for Franchisors
Franchisors must comply with specific disclosure obligations when entering into a franchise agreement as outlined in the Franchising Code of Conduct. The information must be sufficiently detailed to allow a reasonable assessment of the franchise business by a prospective franchisee.
The information required in the disclosure document is quite detailed and should be provided in the format required by regulation. We can provide guidance to ensure that franchisors meet their disclosure obligations and assist with preparing the relevant documentation.
Whether you’re looking to franchise your business or invest in a franchise, we are here to help.
If you need assistance, contact [email protected] or call 08 8166 7120.