Franchising is a legal framework that allows a business to expand without incurring the capital expenditure that would otherwise be necessary. It generally involves the franchisor and the franchisee entering into an agreement under which:
- the franchisor grants the franchisee the right to carry on a business supplying goods or services under a specific system or marketing plan as created or controlled by the franchisor;
- the franchisee’s business is associated with a particular trademark, advertising or a commercial symbol owned, used, licensed or specified by the franchisor; and
- the franchisee is often required to paya percentage of income or other amount to the franchisor before starting and/or while running the business, which may also include amounts for the marketing of the franchise and administrative costs.
Franchisors and franchisees must comply with the Franchising Code of Conduct (“Code”). The Code applies to conduct occurring on or after 1 January 2015 in relation to all franchise agreements entered into, transferred, renewed or extended on or after 1 October 1998.
It is important that franchisees consider the merits of the franchise agreement and perform appropriate due diligence to ensure that they do not suffer losses as a result of entering into a franchise agreement that is uncommercial or is proposed by unscrupulous operators. Ideally, the franchisor should support the franchisee in the conduct of the franchise business and the franchisee must ensure that its conduct upholds the goodwill of the franchise brand.
Rowe Bristol Lawyers is experienced in advising clients with respect to franchising law, including:
- advising the client with respect to the terms and requirements of the franchising agreement and the Code (e.g. prohibition against exclusive dealing);
- liaising with the franchisor and franchisee to resolve queries and concerns prior to entering into a franchise agreement;
- advising the client as to disputes in relation to the conduct of the franchisor or franchisee as applicable; and
- representing clients in relation to recovery of losses, such as claims based on breach of the Code and allegations of misleading and deceptive conduct or false statements by the franchisor.
If you require legal advice in relation to franchising law, please do not hesitate to contact us to arrange a meeting so that we may consider your specific circumstances.
The above information is provided as general information only and should not be relied upon as legal advice. The accuracy of this information may have changed from the date when it was published.