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Thinking of being a Franchisee? – What you need to know

On 1 January 2015, the new Franchising Code of Conduct came into effect. Here are some of the points you should take note of as a franchisee.

What are your rights?

The franchisor (the owner of the business) must disclose any essential information to help you make an informed decision when buying the franchise. That obligation does not end at the negotiation stage. During the course of the franchise relationship, the franchisor must also disclose to you if a materially relevant fact occurs. This includes a change in franchise system, majority ownership or control of the franchisor, and court proceedings against the franchisor or its directors.

Both parties must exhibit good faith when dealing with each other. Indicators of good faith include being honest with each other, considering each other’s interests, and working out your differences.

What are your obligations?

Most of your obligations to your franchisor will be documented in the terms of your Franchise Agreement. It is important to understand your obligations and how it affects your relationship with your franchisor. Be sure to read them carefully!

If I signed the Franchise Agreement but I don’t want buy the franchise anymore, what do I do?

It is important to read the terms of your Franchise Agreement carefully before signing anything.
However, do not worry if you had a change of mind after signing the agreement. There is a cooling-off period of 7 days. You are entitled to terminate a new franchise agreement within 7 days of entering into the agreement or make a payment under the agreement, whichever comes first.

I think that my Franchise Agreement is unfair. Can I terminate it?

Generally, Franchise Agreements can be terminated in several circumstances – the Franchise Agreement being unfair is one of them.
Other circumstances where a Franchise Agreement can be terminated include if a party breaches or goes back on the agreement, if you entered into the agreement as a result of misrepresentation, or if the agreement is unlawful.

For the Franchisor’s Compliance Manual 

For the Franchisee Manual

Unsure where to start? Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or to get answers to your legal questions.

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