For many years franchising in Australia was self-regulated. However, self-regulation by representative bodies of franchisors and franchisees did not work.
Today franchising is regulated. Franchisors are required to adhere to a mandatory industry code, the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (the Code) which is periodically amended.
Dennis Martin, Director with Snedden Hall & Gallop Lawyers, has assisted numerous franchising businesses – both from the perspective of the franchisor and the franchisee. Here, in part 3 of a 3 part series, Dennis, explains the key features of the regulations that highlight the differences between a franchise and any other business.
In Part 1, we looked at the franchisor’s world; and
In Part 2, we looked at the considerations that a prospective franchisee faces.
The Code offers franchisees some certainty in the information they are provided. A franchisor must prepare a Disclosure Document which requires a comprehensive list of key questions to be posed and answered. It is designed to provide an ‘eyes wide open’ exercise for a prospective franchisee.
Some, but definitely not all, of those key matters include:
- Details of the owners/promoters of the franchise and its related intellectual property
- The business experience of the owners
- Have they been sued
- Details of existing franchises
- Licensing arrangements for intellectual property
- Franchise territory
- Supply of goods/services to franchisee (and rebates to franchisor)
- Marketing and funds
- Establishment costs – equipment, real estate/leases, fees, royalties, stock etc
- Financial details and earnings information
- What happens at the conclusion of the agreement
The Disclosure Document is accompanied by the Franchise Agreement and, depending on the nature of the franchise, other non-regulated documents, e.g. leases, licences, non-compete deeds, etc.
As you can see, franchising in Australia, now is standardized and regulated. The Code is overseen by the ACCC (Australian Competition and Consumer Commission), which promotes compliance, fair dealings and also takes enforcement actions where necessary.
How can Snedden Hall & Gallop assist?
If you are considering entering into a franchise, either as a business owner setting up a franchise or as a new franchisee, there are significant regulations designed to protect the participants. It is essential that you receive advice from an experienced franchise lawyer. Please contact Dennis and our Business Team for advice on the best way to proceed with franchising in Australia. You can contact us for any franchising matter by email or by phone on 02 6285 8000.
This is the third in a three-part blog series. Here is Part 1: for the franchisor and Part 2: for the franchisee.