WHAT IS FRANCHISING ?

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Greyson Legal are experienced franchise lawyers with expertise in all facets of franchise law. Whether you are thinking about  buying a franchise business, selling a franchise business or looking at adopting franchising as a method for business growth - contact us for a no obligation discussion about how we can help you.

What is Franchising ?

Franchising is a method for the distribution and expansion of goods and services. It is not a business itself, but a way of doing business.

It involves a licensing arrangement between a Franchisor and Franchisee whereby the Franchisor grants the Franchisee:

  • rights to use certain intellectual property (such as copyright, trademarks and trade secrets);

  • branding association;

  • the right to offer, sell or distribute goods or services under a business system determined by the Franchisor;

  • access to the Franchisor's systems, processes and procedures;

  • management support;

  • leadership and guidance; 

  • training;

  • among others

In return, the Franchisee agrees to pay certain initial and ongoing fees and comply with a range of obligations - typically set out in a Franchise Agreement, Operations Manual and ancillary documents.

Franchising is based on standardisation and consistency of product choice and service delivery across the franchise network. It is a popular vehicle by which prospective business owners can acquire rights to commence a new (or "greenfield") Franchised Business or purchase an existing Franchised Business by way of re-sale. 

For a broad overview of the franchising sector in Australia, refer to Griffith University's publication - Franchising Australia Report 2014.

 

Franchising Code of Conduct

Franchising in Australia is regulated through the Competition and Consumer (Industry Codes—Franchising) Regulation 2014  - known as the Franchising Code of Conduct, which is made under section 51AE of the Competition and Consumer Act 2010.

The Australian Competition and Consumer Commission (ACCC) enforces compliance with the Code.

The Franchising Code of Conduct sets out various obligations upon the Franchisor as well as consumer protection measures for Franchisees. For example, the Code:

  • sets out criteria to assist in determining what arrangements are considered Franchise Agreements;

  • obliges each party to act in good faith;

  • requires Franchisors to give prospective Franchisees and those looking to renew or extend a Franchise Agreement:

    • a Disclosure Document, that contains prescribed information; and

    • a 14-day disclosure period so that Franchisees can make a reasonably informed decision about the franchise;

  • states a Franchisor must give a copy of an Information Statement, in the prescribed form, to a new Franchisee;

  • encourages prospective Franchisees to obtain independent legal, business and accounting advice;

  • entitles prospective Franchisees to a 7-day cooling off period, once the Franchise Agreement is signed or a payment made;

  • sets out a dispute resolution procedure;

  • deals with a variety of other issues, such as:- marketing funds; transfer of franchise agreements; restraints of trade; and termination of franchise agreements.

Deciding to expand your business or concept through a franchising modelor buy into a franchise network is a big decision with unique issues. It is important you get advice from experienced franchise lawyers. 

For expert assistance with your franchising needs, contact Greyson Legal.