What you need to know before you purchase a Franchise
Franchising is a popular business model that empowers entrepreneurs to grow their businesses by granting the right to franchisees to market and distribute goods or services under a recognised brand. For franchisees, this model offers a shortcut to acquiring expertise and business processes without the need for external consultation. It also provides the advantage of association with an established franchise's reputation.
Before diving into a franchise opportunity, there are critical considerations and key documents to evaluate. To ensure you're making an informed decision, we recommend focusing on three pivotal documents that define the franchise's terms and conditions. Additionally, we've compiled a list of essential questions you should ask current franchisees to spot potential red flags early on.
Key Documents for Franchise Evaluation
When entering into a franchise arrangement, the franchisor should furnish you with essential documents that outline the relationship, your rights, and your obligations. These documents should be transparent, legally compliant, and typically include the Franchise Agreement, and a Disclosure Document.
The Franchise Agreement is the cornerstone of the franchising relationship, as it contains answers to numerous questions and insights into the franchise's terms and conditions, such as fees (both incoming and outgoing), the franchise's duration, ongoing obligations as a franchisee, and under what circumstances the agreement can be terminated.
The Disclosure Document, on the other hand, serves to provide prospective franchisees with crucial information about the franchise system. It also offers existing franchisees an up-to-date view of the franchise's operation.
Key Questions to Ask
To make an informed decision, it's advisable to consult with current franchisees. Here are some questions to consider:
Are they running a profitable business?
How long did it take for them to break even, and what's their current growth rate?
Did the franchisor provide adequate training and guidance?
Have they encountered any hidden costs or fees since purchasing the franchise?
Did the franchisor offer support during challenging times, both financially and with business advice?
Have they faced any legal issues with their franchisor?
How We Assist You
Our experienced team is well-versed in franchise law and can assist you in several crucial areas:
Reviewing all agreement documents to protect your interests and ensure fair and reasonable terms before signing.
Preparing license and distribution agreements.
Negotiating contract terms and reviewing lease agreements.
Franchising can be a complex process, and having the right legal support is paramount. At Hewlett Legal, we specialise in franchise law and offer comprehensive assistance for both franchisees and franchisors. Whether you're a franchisee looking to enter into an agreement or a franchisor seeking guidance, we have the expertise to guide you through every step of the process.
For Franchisors:
For franchisors, it's equally essential to have a solid legal framework in place. Our expertise can help you with:
Drafting the master franchise agreement, along with the disclosure document and related annexures, including deeds of guarantee.
Providing guidance on your current agreement and ensuring compliance with the Franchising Code of Conduct.
Preparation of document packs tailored for each new franchisee.
Expert negotiation of contract terms and lease agreement reviews.
Valuable advice on any disputes that may arise during your franchise operations.
With Hewlett Legal, you'll have a dedicated team of legal experts by your side, ensuring that your franchising journey is as smooth and secure as possible. Reach out to our team to discuss your needs. Call our direct line (07) 3310 8716 or email Lucas@hewlettlegal.com.au
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