When you sign up to a Franchise, you should be getting “A business in a box".
But you might be getting something a bit like indentured slavery. It can end up being the sort of deal where you are under the control of the Franchisor and are paying fees even if you are making a loss!
We don’t mean to be alarmist, but franchises agreements are probably the most high risk documents that you can sign. This does not mean that all franchises are bad. They’re not. Some work quite well for the people who buy them. And some don’t……
We review Franchise agreements all the time, and see some pretty frightening things written in some of them. We often see:
Obligations to purchase your supplies from the Franchisor (which is really just another way of imposing a fee)
Very large non-refundable deposits charged before you see any documents;
Business systems that, from an accounting point of view, only allow you to make a basic wage (even though now you’re a “business owner”)
Obligations to contribute to a marketing budget every month, but with no certainty that your own franchise store will appear in the marketing material;
Considerable restrictions on selling your business; and
Very strict restrictions preventing you from being involved in any similar business if you sell or close down.
Franchise Agreements.
One of the main reasons people buy franchises is that they want a business but don’t know anything about business. A franchise seems like the perfect answer. So they buy the business in a box! But here’s the thing….
If you don’t know anything about business, how will you understand the franchise agreement, which is the main “business document”?
It’s one thing to read through an agreement and understand the individual clauses. It’s much more difficult to read the whole thing and understand that (for example) the combination of clause 14(1), clause 19(3)(a)(i) and clause 26 will send you broke.
Protect yourself and your family from substantial risk.
Get a draft of the proposed franchise agreement and call Your Legal HQ straight away on 08 9445 9200 to get advice, clarification and protection around this big decision.
Some people use injury compensation payments or redundancy payments to buy a Franchise. Then they find that it’s not what they thought it would be, money is disappearing and they have no way out.
Don’t let that be you.
We are ready to put your mind at ease. There are some good franchises out there. And some bad ones. In franchising, early advice in this area is the smartest possible investment.
Services
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We can prepare and revise franchise agreements to make sure they comply with federal and state laws, as well as protect the interests of the client, whether they are a franchisor or franchisee.
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We can negotiate terms of the franchise agreement on your behalf. This can include the fees to be paid, territory rights, training and support from the franchisor, marketing obligations, and the terms of termination or transfer of the franchise.
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Franchise laws can be complex and vary from state to state. We can ensure compliance with these laws, such the Franchising Code of Conduct, the Australian Consumer Law, Competition and Consumer Act 2010, the Fair Work Act 2009, the Australian Securities and Investments Act 2001.
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If a dispute arises between the franchisor and franchisee, Your Legal HQ can assist in resolving these issues, whether through negotiation, mediation or arbitration.
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A franchisor must provide prospective franchisees with a bundle of documents, which includes detailed information about the franchisor and the franchise system.
These include an information statement, a copy of the Franchise Agreement, a disclosure document, a key facts sheet and a copy of the Franchising Code of Conduct.
We can assist in reviewing these documents behalf of a prospective franchisee.
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We can also provide general business advice, such as counseling on business structure, tax implications, and best practices for operating a franchise along with examples we have come across to provide insight into the reality of franchises.