Category: Commercial Date: 2.2.20 Published by:

What is a franchise?

This is an agreement between a franchisor, who grants a licence of use, sell and develop a particular product, service or brand.

Although, the franchisee has a right to use any intellectual property owned by the franchisor, it is important to understand the licensing terms.

Once the licence is granted to the franchisee the franchisor promises to maintain they will need to adhere to maintain the franchisee’s business through:

  • Technical, product, training and support
  • Advertising and marketing
  • Providing expertise and knowledge of the services and nature of the brand and product

Before buying a franchise

Before you enter into a franchise agreement make sure that the franchisor has provided you with franchise agreement. They must explain the risks that are involved and rewards.

They must also provide you with the documents listed below within 14 days before you sign the franchise agreement or make a non-refundable payment.

  • The Franchise Code of Conduct – this is the industry code that all franchisors and franchisees will need to adhere to.
  • A disclosure document- which will have all the information about the franchise.
  • The franchise agreement – in its final form.

Some tips before signing the agreement:

  1. Do not rush into signing the franchise agreement until you make sure you have received independent legal advice;
  2. You will need to read your disclosure document and make sure that you take the time to understand it;
  3. You may want to seek to speak to current and former franchisees, as they be able to provide further information;
  4. Make sure that everything is in writing and do not rely on the franchisor.


The rights of a franchisee?

The rights fall under the Franchising Code of Conduct (Competition and Consumer (Industry Codes—Franchising) Regulation 2014).

The franchisee is allowed to terminate the agreement within seven days.

Furthermore, a franchisee is permitted to form an association, to associate with other franchisees if they choose and franchisees are also permitted to transfer the franchise to another party without the franchisor unreasonably holding consent.