Franchise Buying Tips

Rose Lawyers on 30 October 2014

Before You Buy Into a Franchise, Make Sure You Understand the Agreement

australian food franchiseWe’ll begin with the basics; with the definition of a franchise. Basically, a franchise is the right or license granted by a company – usually already with various stores in existence – to an individual or group to market its products or services in a specific territory. When you are buying into a franchise, you are essentially buying the rights to use their brand and business systems to generate income.

When you buy into a franchise, you will be required to sign a Franchise Agreement. This legal document contains all of the terms and conditions necessary to the running of your franchise, and sets out the relationship between the franchisee and the franchisor. These tips should help you to better understand the document, and the rights contained therein:

1. Read the Franchise Agreement

In order to understand the Franchise Agreement, it is essential that you read it fully and meticulously. To get the most out of the Franchise Agreement and to cover all your bases, it is best to have a lawyer review the document and explain it to you.

2. Ask around 

Speak to people who have already bought and are running a business in the same franchise line. What do they like or dislike about it? Is the franchisor helpful, or are they cut-throat? Asking around is the best way to prepare yourself for the ins and outs of running your own franchise alongside the particular franchisor.

3. Know your territory

The Franchise Agreement will detail whether or not you have any territory rights, and whether or not they are exclusive. Ask questions, such as: ‘Does the Franchise Agreement allow other stores to be setup close to your store?’ Have a lawyer explain the specificities and consequences of the Agreement’s clauses.

4. Establish quality

As a franchisee, it is important to understand the product you are selling, and the business savviness of the franchisor you will have a relationship with. Important aspects of this are whether or not the franchisor is advertising the product and the location adequately. If you are the first store within a franchise in a particular area, there might not be any advertising targeted at your area.

5. Training and support

It is important to obtain legal advice before purchasing a franchise, as it might be the case that the franchisor will not be willing to guide you through the process of setting up. These terms will be set out in the Franchise Agreement. The franchisor isn’t necessarily required to help you with anything, such as your advertising campaign or the running of the store. If you seek advice before signing the Agreement, a lawyer can ensure that your franchisor fulfils any obligations to provide adequate training.

Summary: 

Franchise Agreements lay out the terms and conditions of the relationship between franchisee and franchisor. It is important for the running of your business that you understand both your obligations towards the franchisor, and their obligations towards you. To make sure you know all of the rights and requirements set out in your particular agreement, it is best to have a lawyer to help you through the process, and to help protect you from potential loopholes.

Read more about business law here or if you want to buy a franchise please contact the team at Rose Lawyers for a no obligation quote:

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