Buying a Franchise is a bit like getting married.
You are making a long term commitment to a relationship with someone you hope you can trust and could lose a lot if it doesn’t work out.
Franchising in Australia is regulated by the Franchising Code of Conduct but the Franchise Agreement is still key to the parties’ rights and obligations.
When buying a new or established Franchise business in NSW or Australia it is essential that you obtain independent legal advice. This is particularly so as in most cases the Franchise Agreement and any marketing material contain significant disclaimers and no reliance clauses that affect your ability to rely on anything you have been told by the Franchisor.
Generally a Franchise Agreement will require you to carry on the business in accordance with an Operations Manual.
This is a confidential procedures manual that you won’t be provided with until you have signed a Franchise Agreement and usually have paid a substantial Franchise Fee. Whilst some insights into the success of the Franchise can be gained from a Franchise Disclosure Statement it is essential that prospective Franchisees speak to other existing or former Franchisees about the real financial and personal commitment required to operate the Franchise business successfully and the level of support that can be expected from the Franchisor.
Failing to get legal advice and/or to undertake proper due diligence can lead to the Franchisee concluding that they haven’t received what they bargained for.
In most cases, this will result in the Franchisee accepting that they have suffered loss or finding themselves in a dispute and typically legal seeking advice in relation to misleading and deceptive conduct under The Australian Consumer Law.
Whether you are a Franchisee or Franchisor, to operate a successful business and avoid disputes you need:
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