Are you buying or setting up a new franchise in Perth or Western Australia? We can assist with your Franchise Agreement and Disclosure Document. We have assisted dozens of franchise owners/buyers to review their proposed or existing franchise agreement.
Buying a franchise?
If you are buying a new business, including a franchise, it is important for you to understand your risks and obligations. Only by knowing these things can you take adequate steps to set up a compliance system to protect you from defaulting under your franchise agreement.
James Irving, lawyer, says:
“Franchise agreements vary a lot, but. compared to other types of agreements they are almost always big and complex. Some are missing features we might think should be standard, such as a capacity for the franchisee to exit the agreement. Sometimes the disclosure document, which is easier to read, doesn’t match the clauses of the franchise agreement. Buying a franchise is a big investment, and a problem or dispute with your franchisor could turn out to be very costly and time-consuming. Having your document reviewed professionally by a lawyer is a smart thing to do.”
Hot issues: the things that can cause problems
Many things can potentially go wrong with a franchise business. If you are concerned about any of the following issues, it is probably a good idea for you to ask a lawyer to review the franchise agreement before you sign it:
- what limitations apply when the business is sold?
- what happens when the agreement comes to an end, for example, do you have to sell your equipment to the franchisor, and for what price?
- is the franchisee is allowed to terminate the franchise agreement, or transfer it to another person?
- can the franchise agreement put you in conflict with your landlord?
- can the franchisor can compete directly with the franchisee?
- how is the franchise territory defined, and does this result in artificial competition with other franchisees?
- is the range and size of fees being paid to the franchisor normal?
- what are your marketing obligations,?
- what happens if the manager of the business dies or becomes incapacitated?
- is the business is subject to performance targets, and what happens if there is a downturn in business?
- how do the guarantee clauses work?
The wrong time to find out that your franchise agreement is unfair, or too restrictive, is when a problem arises, maybe many years after you have signed it. Don’t be caught by surprise. Find out exactly what is in the agreement, and whether that is normal or if it poses unacceptable risks, before you sign up.
After we read through your franchise agreement, we will meet with you to discuss the issues we discovered, and assist you to negotiate further with the franchisor to adjust the agreement to make it fairer for you.
We also help business owners set up new franchise systems and comply with the requirements of the Franchising Code of Conduct.
Did you find this blog post useful? Please visit our Resources page for links to our other articles and presentations on business law topics. Browse through the list to see if anything there interests you.
Do you require assistance with a franchise agreement and disclosure document? Contact us to discuss your situation. We can assist you. We have reviewed franchise documents for many SME business owners. See our Customer Profiles page to see the stories of many of our SME business owner clients and how we worked with them to build a better foundation for their business success.
You make also like to read our articles on franchising topics published by LinkedIn Pulse:
- Franchising: A Business Out of the Box?
- Franchising Basics: Brand/Image Protection
- Franchising Basics: Controls on the Franchisee
- Franchising Basics: Termination Clauses
- Franchising Basics: Marketing
- Franchising Basics: Due Diligence