Franchise Agreements
Business & Commercial
Sound Legal Advice For Franchise Agreements in Newcastle
A franchise agreement grants a franchisee the exclusive right to operate a single franchise business for a fee, pursuant to the terms of the franchise agreement. When a franchise agreement is entered, the franchisor controls the name, brand and business system you will be using The franchisor grants you the right to operate the business usually for a set period of time. There are some obligations owing to franchisors from the franchisee including, conducting the operations of the franchise; payment of royalties; and protection of the franchisor’s intellectual property.
Burgess Thomson can assist you in reviewing the contract and ancillary documents before signing a franchise agreement.
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Frequently asked questions
What are franchise fees and royalties?
A franchise fee can include the up-front amount paid to the franchisor for the use of their name and brand, and operating systems. Ongoing fees and royalties are usually paid to the franchisor for providing ongoing business, management, and technical support.
What documents must a franchisor give the franchisee before entering a franchise agreement?
A franchisor must give a franchisee an Information Statement about franchising once an interest in the franchise is shown. A franchisor must also give:
- The Franchising Code of Conduct- this is an industry code all franchisors and franchisees must follow;
- A disclosure document – this document contains information about the franchise. It includes information to help the franchisee make a reasonably informed decision about whether to buy the franchise;
- The franchise agreement (in its final form).
The franchisor must give the franchisee these documents at least 14 days before the agreement is signed or a non-refundable payment is made. This allows the franchisee to have at least 14 days to read over them and can take more time if they need.
When reading over these documents, Burgess Thomson can give advice on any supply restrictions, or on the purchase price of the franchise and the costs to run it.
Can I change my mind after I enter a franchise agreement?
You can change your mind within seven days after signing or paying money under the agreement. This is referred to as your right to ‘cool off’. However, if you buy a franchise and change your mind a year later, it will be costly to end the franchise agreement early. If you have paid money to the franchisor but change your mind within the seven days, the franchisor can keep your money if:
- This is included in the franchise agreement; and
- The money is for reasonable expenses.
The franchisor must give the remainder of your money within 14 days.
