Franchises have become common in the commercial sphere as a way for larger businesses to expland, and for individuals to operate a business without having to establish a brand or goodwill.
Examples of franchises can be seen at many levels in any shopping centre.
With these benefits comes complexity in terms of mandatory franchise fees, possible profit split and the need for both parties to comply with the franchise agreement.
It is always necessary to review financial records to ensure that joining the franchise will provide the profit you expect.
You must ensure that you comply with the federal Franchising Code of Conduct under the Competition and Consumer (Industry Codes—Franchising) Regulation 2014.
You may also be agreeing to a restraint of trade clause that prevents you from operating a similar business in the area for a period of time should you decide to discontinue the franchise agreement.
It is therefore prudent for a franchisee to seek legal advice before signing any franchise document, as franchisors are often sophisticated companies and there may be unexpected obligations imposed on the franchisee – for example, in relation to contributions towards advertising or for payment of other fees that on the face of the agreement do not particularly relate to your franchise.
In our experience, negotiation prior to signing an agreement ensures that you obtain the most favourable terms to you, and that both parties know where they stand in respect of their obligations.