Franchising

Franchise Lawyers | Greyson Legal

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

It is essentially a marketing concept involving an arrangement between a Franchisor and a Franchisee whereby the Franchisor’s knowledge, reputation, procedures, intellectual property and access to its branded products and services is licensed to a Franchisee. In return, the Franchisee pays certain fees and royalties to the Franchisor and agrees to comply with certain obligations typically set out in a Franchise Agreement and Operations Manual.

Franchising is based on standardisation and consistency of product choice and service delivery across the franchise network. 

To be successful, each piece of the franchise puzzle must fit and work together.

From a Franchisor's perspective they are looking for Franchisees that have adequate capital; previous business, professional or other life experience compatible with the Franchisor's culture and the requirements of the franchise system; an entrepreneurial nature;  related skills; enthusiasm for the brand; able to work autonomously as business owner, as part of a team and within a broader franchise network; and the motivation and time to devote to the franchised business.

For Franchisees, ideally any franchise system they are seeking to be a part of should be based on appropriate due diligence, including assessing:- the costs involved; that the Franchisor is reputable; the franchise model is proven; at what point in the business life cycle is the franchise system, the terms and conditions of the Franchise Agreement and other contractual documentation is reasonable; etc. Prospective Franchisees should also assess their your own financial resources, skills and capabilities to deal with the requirements of the Franchised Business. 

Getting the Right Legal Advice

Franchising law is a niche area of commercial legal practice. Much like in the health profession where you have doctors that specialise in a particular medical field, a franchise lawyer is a lawyer with expertise in franchising. 

It is important to get the right advice and assistance from lawyers experienced in franchise law. Greyson Legal is a leading Sunshine Coast franchise law firm, its Principal having acted for nearly 20 years as a franchise lawyer. We are well positioned to:

  • assist our Franchisor clients to set up, manage and grow their franchised system in an ever-changing legal and economic environment; and
  • help our Franchisee clients with the process of buying a franchise business or selling an existing franchise business. 

With offices in Redcliffe and Caloundra, Greyson Legal represent clients across the Sunshine Coast region as well as the Redcliffe and Moreton Bay peninsula. More broadly we also act for clients on the Gold Coast and in Brisbane.

We have come across a number of instances where clients have either not obtained legal advice or obtained legal advice from lawyers not familiar with franchising law. When issues regarding the operation of the Franchised Business have arisen or disputes between Franchisor and Franchisee have escalated, these clients then find themselves in difficult, costly and protracted legal arguments trying to seek a resolution of the matter.  Although we have a good track record of assisting clients to achieve a resolution where disputes occur, we find that if clients had obtained the correct advice at the start they may have avoided the situation they now find themselves in. 

Our clients range from start-ups and sole traders through to larger business enterprises; across a variety of industries, including - retail, food and hospitality, services, fitness and leisure, building and construction, promotion and education.

SOME OF THE FRANCHISE CLIENTS WE PROUDLY REPRESENT

F45 Training
Currimundi
Tribe41 Functional Training Caloundra
IRON ZUU
Burleigh Heads
Swimart Mobile Franchise
Redcliffe

Franchising Statistics

In 2014, Griffith University in conjunction with the Franchise Council of Australia produced the Franchising Australia Report 2014

The Report captured a range of data regarding the Australian franchise sector. In summary, the Report noted:

  • There were 1160 business format franchisors in Australia; 
  • There was an estimated 79 000 units operating in business format franchises;
  • More than 460 000 people were employed directly in franchising;
  • Sales turnover of the entire franchising sector was estimated at $144 billion;
  • 86 % of franchise systems originated in Australia;
  • 30 % of franchisors have entered international markets;
  • interestingly only 1.5 % of franchisees were involved in a substantial dispute with a franchisor in the 12 month period leading up to the Report;
  • 45 % of franchise systems engaged in online sales with customers.

The data illustrates that franchising in Australia is a popular business vehicle. In recent times, however, this has been challenged by a number of factors including:

  • Franchise system failures, which have impacted on both the Franchisor and Franchisees;
  • a number of rogue Franchisors or Franchisors gouging profits from their Franchisees; 
  • weak economic conditions;
  • tightening of consumer spending in some sectors; and
  • competition for the consumer dollar.

 For  Franchisors

Greyson Legal's franchising team helps its Franchisor clients with all aspects of the franchise model, including:

  • preliminary steps establishing the franchise system;
  • ensuring intellectual property rights are in place and advising you on intellectual property protection;  
  • assisting with issues that arise whilst managing the franchise network;
  • handling the independent acquisition and sale of franchise territories by its Franchisees;
  • on-going statutory and regulatory compliance advice;
  • guidance in regards to franchise dispute resolution; and
  • ultimate sale of the franchise system to a new owner, should that arise.

We have the requisite experience and expertise to advise Franchisors on all aspects of their franchising needs and act as ad-hoc in-house counsel adding value to our client's business.

It's important for Franchisors to understand their obligations under the Code. For example, a failure to properly disclose under the Code to prospective Franchisees can result in significant penalties for the Franchisor (and if the Franchisor is a company, it's directors are exposed to penalties if they are knowingly concerned in the breach). Franchisors can also be subject to other remedial action, such as injunctions and having to make public declarations that they have contravened the Code, which could be damaging to the brand and the Franchisor's reputation.  

The Australian Competition and Consumer Commission (ACCC) has powers under the Competition and Consumer Act 2010 (the Act) to enforce non-compliance with the Code. The type of enforcement action the ACCC takes depends on each individual case. It could include one or more of: 

  • Administrative Resolutions - whereby the party in breach might agree to stop certain non-compliant conduct and compensate those harmed by the conduct;
  • Issue of an Infringement Notice - this may apply if the ACCC believes there has been a contravention of the Act that requires a more formal sanction;
  • Section 87B Enforceable Undertakings - these involve undertakings by the party in breach agreeing to remedy certain  harmful conduct, accepting responsibility for their actions and establishing internal processes to avoid future non-compliance with the Act;
  • Legal action seeking Court orders in relation to pecuniary penalties; injunctions; financial redress; community service or probation orders; further education and training; disqualifying individuals from being directors of corporations; seeking convictions and prison sentences.

Getting the right assistance and advice can help eliminate these risks.

Go to Franchisor legal services for more information about how we help our Franchisor clients.

For  Franchisees

Buying a franchise business is a big decision. You need to consider the purchase carefully, undertake relevant  due diligence and get appropriate professional advice. As leading franchise lawyers, Greyson Legal are familiar with this field of law and can assist you in the best possible way. 

Are you thinking about:

  • entering into a Franchise Agreement ? 
  • how to buy a franchise ?
  • buying into a franchise ?
  • getting advice on buying a franchise ?
  • opening a franchise business ?

We can help you with all stages of buying a franchise business, including:

  • providing advice on any related Contract of Business Sale;
  • reviewing the Franchise Agreement, Disclosure Document and ancillary documents;
  • checking Code compliance;
  • assisting you to negotiate amendments to the franchise documentation or clarify issues of uncertainty with the Franchisor;
  • undertaking all appropriate searches;
  • reviewing and advising you on any associated lease or occupancy licence; and
  • assisting with business licensing;
  • handling the business conveyance from start to completion.

At Greyson Legal we also assist our clients with other related matters, such as:

  • business structuring advice associated with the franchise acquisition;
  • employment law;
  • statutory and regulatory compliance;
  • leasing;
  • franchise disputes;
  • general commercial law and business law matters as they arise; and
  • the ultimate sale of the Franchisee'sfranchised business.

Go to Franchisee legal services for more information about how we help our Franchisee clients.

Franchise Client Matter Highlights

  • We assisted one of our clients with setting up the legal framework to expand their fitness education and training business in Australia through a franchising model. Greyson Legal have since provided further advice and assistance to that client in relation to their international licensing arrangements, their trademarks and other intellectual property protection strategies.
  • We represent an Australian protective coating business in respect of its Australian and international development, including franchising, distribution and licensing requirements. This includes an extensive franchise network and helping our client to manage their trade mark and intellectual property portfolio.
  • We have advised a number of franchisee clients in relation to the legal documentation related to the acquisition of various franchised businesses, including:- Franchise Agreements, Disclosure Documents, Franchising Code compliance and related contracts.
  • We helped a client develop their marketing and promotions business by setting up a franchise model with outlets in different locationsaround Australia and establishing a Master Franchise in New Zealand. 
  • We have advised both franchisors and franchisees in regards to their respective rights and obligations where franchise disputes have occurred and provided guidance in relation to dispute resolution processes, such as, through mediation or other litigious action.

Our Range of Franchising Legal Services

Franchise Business Acquisition and Sales

For entrepreneurs looking to purchase a franchised business, we can:

  • review and advise you on all franchise documentation to ensure that you are aware of your rights and obligations as a prospective Franchisee;
  • explain the effect of the Franchising Code of Conduct as it relates to the transaction;
  • advise you on the terms & conditions of any associated Contact of Business Sale;
  • assist you in negotiations with the Seller and Franchisor;
  • undertake the business conveyance process through to settlement;
  • where applicable, advising and assisting you with any associated lease or occupancy licence.

Apart from the franchise agreement and disclosure document, there are a range of ancillary legal documents that are needed in connection with a franchise acquisition, for example, confidentiality deeds, deeds of guarantee and other documents prescribed by the Code, such as a legal advice certificate or statement. We also assist with this legal documentation.

If you are an existing franchise business owner looking to sell your business, at Greyson Legal | Franchise Lawyers we have the necessary skills and expertise to guide you through that process.

Franchise Agreements

We assist our:

  • Franchisee clients with Franchise Agreement reviews, advice and assistance negotiating any agreed changes to the agreement;
  • Franchisor clients to develop and prepare Franchise Agreements that meet their business needs, and which also complies with the Franchising Code of Conduct and other laws.

Operations Manuals

An Operations or Procedures Manual is an important component of the franchised business. It is the blueprint which captures the critical know-how and sets out the various processes and methods of undertaking the business. 

We can assist with the creation of or review of these manuals.

Code Compliance

Infringements of the Franchise Code of Conduct can result in fines, penalties and potential termination rights, so it is important to get advice from lawyers familiar with the Code. We have this expertise. If you have any questions about the Code or compliance infringements and your associated obligations and/or rights, contact Greyson Legal | Franchise Lawyers.  

Disclosure Documents

Disclosure documentation is a regulatory pre-requisite of a franchise. At Greyson Legal | Franchise Lawyers, we:

  • provide disclosure document review and advice to our Franchisee clients; and
  • can prepare and update disclosure documents for our  Franchisor client to ensure it complies with the Code.

Master Franchises

Whether you are an existing Franchisor looking to grow your business by establishing a Master Franchise in another country or region, or considering acting as a Master Franchisee in Australia for an international company, Greyson Legal | Franchise Lawyers can assist you with that process.

Franchise System Setup

If you are an existing business owner and looking at ways to grow your business, then franchising may be a strategy worth considering.

Greyson Legal | Franchise Lawyers have extensive experience in franchise systems set up.

We represent a number of Franchisor clients with franchise outlets across Australia and with international interests.

Premises Leasing

Depending on the nature of the franchise system, a premises lease or occupancy licence maybe involved. The lease or occupancy licence may in turn be either of a commercial or retail nature.

In Queensland (as with other States and Territories in Australia), retail leasing is regulated. In terms of retail franchises, it is important to be aware of these statutory requirements.  

Apart from the franchise agreement, leasing can also impose restrictions on a franchised business.

Greyson Legal | Franchise Lawyers are experienced in leasing - we can advise you about your rights and obligations under the lease or occupancy licence.

We can assist with reviewing, advising and negotiating commercial or retail leases (and drafting lease documentation).

Licensing and other agreements

Apart from the main Franchise Agreement, there are a range of supporting and ancillary legal documents. We can assist with preparing and/or reviewing licenses and other agreements, such as:

  • IP Licenses
  • Confidentiality Agreements 
  • Deeds of Guarantee
  • Security Agreements (PPSA)
  • Restraints of Trade; and
  • the like

Intellectual Property (IP)

A key component of franchising is the ability of the Franchisor to effectively licence its IP (e.g., trademarks and copyrighted material) to Franchisees in connection with the brand.

Some IP can be owned by other entities associated with the Franchisor. Franchisors then enter into separate IP Licenses with those entities, pursuant to which the Franchisee is then granted a right as sub-licensee.

As part of a Franchisee's due diligence it it important to check the Franchisor's IP is in fact in place and current or that any IP Licence is properly granted.

You can feel confident that Greyson Legal | Franchise Lawyers will advise you about your IP obligations under a franchise agreement.

Where we act for Franchisors, we can conduct an IP audit and advise you about matters relevant to your IP, including structuring and registering trademarks within Australia and internationally.

Dispute Resolution

Franchising involves a relationship between the Franchisor and Franchisee. Sometimes, this relationship breaks down and a dispute arises.

At Greyson Legal | Franchise Lawyers we have the skills necessary to assist you with dispute resolution, whether that be through assisting you to negotiate an agreed outcome, formal mediation, or in more serious disputes - litigation.

The Principal has successfully assisted a number ofclients to either negotiate a settlement or mediate a dispute, thereby avoiding the costly exercise of litigation.

Litigation

Where a negotiated or mediated outcome to a dispute cannot be achieved, we can advise and represent you in court proceedings. We have connections with a number of barristers whom are also able to provide appropriate counsel. 

 Regulation

Franchising in Australia is regulated through the Trade Practices (Industry Codes — Franchising) Regulations 1998, known as the Franchising Code of Conduct.

Generally, the Code applies to all franchise agreements (including renewals, transfers or variations).

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

The ACCC have broad powers including the ability to:

  • investigate alleged breaches of the Code
  • issue infringement notices
  • initiate court action seeking penalties, injunctions, compensation, damages or other orders.

It is important you aware of your rights and obligations under the Code. Ignorance of your obligations is not an excuse.

If you are unsure of your obligations or need advice about your rights, Greyson Legal | Franchise Lawyers is here to help.

Franchise Systems our clients have been involved with

Over the past near 20 years the Principal has acted for numerous clients in relation to the acquisition or sale of franchised businesses connected with many well-known brands, such as:

Food, coffee and hospitality franchises, like:

  • McDonalds Restaurants
  • The Coffee Club
  • Gloria Jean's Coffees
  • Brumby’s Bakery
  • Bakers Delight
  • BB’s Café
  • Sumo Salad
  • Stella Rossa Cafe
  • Donut King
  • Cheesecake Shop
  • Grill'd Restaurants
  • Toscani's Restaurants
  • Outback Jacks
  • New Zealand Ice Cream
  • Paul’s Home Delivery
  • Bucking Bull
  • Pizza Hut
  • Domino's Pizza
  • Pizza Capers
  • Eagle Boys

Service based franchises, like:

  • Video Ezy
  • Blockbuster
  • Ultra Tune
  • Dymocks
  • Battery World
  • Price Attack
  • Jim’s Mowing
  • Clark Rubber
  • Refund Home Loans
  • Telechoice
  • Poolwerx
  • Fastway Couriers
  • Gametraders
  • Swimart
  • Tribe41
  • F45 Training
  • BOAB Boats
  • and others. 

 Looking to Expand Your Business ?

  • Are you an existing business owner thinking about ways to build and expand your business ?
  • Is the business trading successfully ? 
  • Is your business concept distinctive and proven ?
  • Can your business concept be replicated ?

If you answer "yes" to these initial questions, then franchising may well be a business growth strategy you can adopt. 

Go to our Franchisor legal services section for more information.

IF THIS SOUNDS LIKE YOU, NO BETTER TIME THAN THE PRESENT TO GET THE BALL ROLLING. 

Contact

 Tel:(07) 5309 5739
E: info@greysonlegal.com.au
Member Queensland Law Society