The Franchising Code requires that 3 documents are provided by the Franchisor to prospective Franchisees prior to the parties entering into the contract to buy / sell the franchise:
- Franchise Agreement
- Disclosure Document
Information Statement for Prospective Franchisees
Failure to provide these documents is a breach of the Code and exposes the transaction to being declared void, meaning that in some circumstances the Franchisee could get out of the contracts or avoid being bound to certain terms.
From 1 January 2015 there were significant amendments to the Franchising Code relating to disclosures and document formats. Failure to use the correct format or disclose the required information can also constitute a breach of the Code.
In addition to these 3 documents, properly planned and structured franchises may also require additional documentation relating to:
- Establishment of new companies or trusts
- Shareholder / Partnership agreements
- Product / service supply agreements
- Licences for use of intellectual property or assets owned by other entities in the group
- ACCC notifications regarding exclusive dealings (mandatory purchase of goods from specific parties)
- Certificates of independent advice
- Assignment of property Leases
- Sales of business agreements (if selling an existing business to a Franchisee)
You may find templates on the internet for Franchise Agreements and some of the related documents. We strongly recommend you do not use templates or DIY methods. Many new Franchisors trying to do things on the cheap have led themselves into a lot of difficulty by using templates or not thinking through the full range of issues and risks in the new franchise business.
Franchising is a method of replicating and scaling your business. If you were to build an office block or block of apartments would you DIY or use building kits? No, so think of franchising the same way – you need professional commercial and legal advice.
LEGAL COSTS – FRANCHISE DOCUMENTS FROM ONLY $15,000
Australian Franchising law is a specialist area of practice – there are some very good Lawyers that specialise in Franchising and there a lot of Lawyers who know nothing about it or only do the occasional franchise matter. You need to use specialists and we work with some of the best.
If you were to shop around and ask for quotes on preparing your documentation you are likely to receive quotes up to $35,000 just for the legal documents.
We work with specialist Franchise Lawyers from major law firms around Australia and can get your legal costs down to $15,000 – $25,000 because of the relationships we have and the volume of business we do with those law firms. This saves you thousands and gets you partnered with expert lawyers in large reputable firms.
After designing the commercial and operational aspects of your franchise we then work with the Lawyers to overlay the legal aspects and we make sure the suite of legal documents are properly customised to your model. You end up with a full set of best practice terms and documentation that is complaint and ready to use.