Franchise Agreements. Australia is the most franchised country in the world. The growth in franchised businesses in Australia has been enormous. Franchising is one of the most popular business models for expanding the scale of a business in Australia. Franchising is heavily regulated in Australia.
Business format franchising is today the fastest-growing segment of franchising and has spread to virtually every sector of the economy in Australia. It has significantly more franchise systems, more outlets, more employees and more opportunities than product/trade name franchises.
This contains both positive and negative aspects. On the positive side there are many avenues for franchisees to seek compensation and redress in the event that things go awry. On the negative side there is a large amount of legal red tape.
Franchising is not a business itself, but a way of doing business.
Franchising is a business relationship in which the owner of the business providing the product or service assigns to independent people the right to market and distribute the franchisor’s goods or service, with use of the business name.
“Franchising” is used to describe a number of business models, the most commonly identified of which is “business format franchising”.
Standardisation, consistency and uniformity across all aspects are hallmarks of the business format franchise.
Business format franchising is today the fastest-growing segment of franchising and has spread to virtually every sector of the economy in Australia. It has significantly more franchise systems, more outlets, more employees and more opportunities than product and tradename franchises.
Business format franchising requires a unique relationship between the franchisor (the owner of the system) and the franchisee (the owner of the individual outlet), which is commonly referred to as a “commercial marriage”.
This ongoing business relationship includes the product, service and trademark, as well as the entire business concept itself from marketing strategy and plan, operational standards, systems and formats, to training, quality control and ongoing assistance, guidance and supervision.
In short, it provides small business (the franchisee) with the tools of big business (provided by the franchisor).
Franchise Agreement + Schedule
Covers matters required by the Franchising Code including:
- Interpretation & Definitions
- Cooling off period
- Franchisee’s initial obligations
- The Code
- Designated representative
- Training fee
- Initial capital investment fee
- Ongoing franchise fee
- Duties of the Franchisor
- Duties of the franchisee
- Customer referral
- Accounts and Financial Records
- Advertising and marketing
- Business name
- Sale by franchisor
- Sale by franchisee
- Preconditions to consent to sale
- Consequences of termination
- Restraint of trade
- Dispute resolution
- Independent contractors
34 pages long.
On 1 January 2015 the new Franchising Code of Conduct came into effect. The New Code requires among other things, additional disclosure to be given to Franchisees, including an Information Statement. 3 pages long.
Disclosure Document with Free Sample
On 1 January 2015 the Franchising Code was repealed and replaced with the New Code. References to the Franchising Code of Conduct in the legislation are now references to the New Code. The changes made in the New Code Disclosure Document include provisions that make changes to:
- the common law obligation to act in good faith;
- marketing funds be kept separate
- marketing funds only be used for purposes disclosed .
- franchisors required to contribute to marketing funds;
- limits significant capital expenditure ;
- limits end of term restraint of trade covenants ;
- limits nominating a jurisdiction for dispute resolution ;
- require a new ‘information statement’ in addition to the disclosure document;
- expands the information to be given in a disclosure document
- expands the circumstances in which penalties may be imposed on franchisors for breaches of the code.
18 pages long.
Franchising Practice Guide
We recommend you turn to our Practice Guide on Franchising for a full coverage of the law and practice. The Practice Guide is available from our other site, Documents Online.