Franchising is one of the most regulated industries in Australia. The Franchising Code of Conduct (“Code”) sets out a range of mandatory requirements in relation to the entering into of a franchise agreement, including the form and content of disclosure documents, and particular clauses that must be included in the franchise agreement itself.
The Code also governs many aspects of the ongoing relationship of the franchisor and franchisor including dispute resolution.
A good franchising lawyer needs to have a thorough understanding of the Code, as well as other aspects of the law which typically apply to franchises such as contract law, trade practices law (Australian Consumer Law), intellectual property law and leasing.
Steven Pynt has had over 30 years’ experience in franchising commencing in the early 1980s when his father Derek started the Bed Shed, franchise group. More recently he spent 7 years working for the Muzz Buzz drive-through coffee franchise chain as managing director and then legal director. This substantial experience in both the legal and commercial aspects of franchising gives him a unique insight into franchise operations from both a franchisor and franchisee point of view.
Steven is able to assist franchisors and franchisees in a range of matters including
- Preparation of franchise documents for franchisors
- Review of franchise documents for franchisees
- Ongoing Code compliance requirements
- Supply agreements
- Dispute notices and mediation
- Purchase and sale of franchises
- Business structures
The 4 biggest mistakes that we see new franchisees make:
1 – Going it alone without seeking advice
New franchisees often get too excited over the brand name and don’t do the required level of due diligence. There are a lot of factors to consider, including proper planning and preparation involved in venturing into your own business.
This is amplified when entering into a franchise agreement, and seeking advice from both an experienced lawyer and accountant will help ensure you are making the right decision. Doing it on their own is the biggest mistake many new franchisees make.
2 – Buying a franchise will give you a better lifestyle
Although owning your business may give you more lifestyle flexibility, it is a lot of work. It can be very rewarding work, but the hard yards have to be put in to reap the benefits. If you’ve owned your own business before, you will understand this.
If you haven’t, then you need to know that buying a franchise doesn’t generally include training on managing your finances, or how to manage staff. Although the franchisor will provide support for your business, It is your responsibility to run your business, not the franchisors.
3 – “I’ll use a lot of the franchise model but then I have my own ideas too”
If you buy a franchise, use their systems. They usually have very well crafted, proven documentation marketing and business plans that other franchises have succeeded with. You may also breach your franchise agreement if you implement your own ideas in the business without the franchisor’s approval.
Purchasing a franchise is not a guarantee of success. Any new business involves risk, and although you will have to work hard to implement the business plan provided, the good news is that you’ve been provided with a proven business format. The main variable is how well you use it.
4 – Not understanding the termination process
One day you may want to retire and sell your franchise. Ensure you are aware of the process before entering into your franchise agreement. There will be conditions in your agreement that restrict you from simply listing your business for sale. Some examples are:
- You may have to give the franchisor the “first offer of refusal”;
- The franchisor may be entitled to a percentage of the sale proceeds;
- Your franchisor has the power to consent to or, subject to certain limitations, reject the purchaser.
Also, certain restraints of trade may apply whether you sell the business or if your franchise agreement simply expires.
Owning a franchise can be both profitable and rewarding, and properly planning the purchase with appropriate due diligence is a distinct advantage.
If you have any questions regarding franchise law, contact Steven on (08) 9336 6300 or email [email protected]. for confidential, professional advice.