What to consider before signing a franchise agreement

What to consider before signing a franchise agreement

It is essential to understand what your legal rights and responsibilities as a franchisee entail before buying a franchise.

The franchise agreement is a legal document that includes the rights and responsibilities of the franchisee and the franchisor.

Before signing the franchise agreement ensure the franchisor has provided you with relevant information about the franchise within 14 days before you start, renew or extend a franchise agreement or pay a non-refundable deposit, as per the Franchising Code of Conduct.
This information will include:
– A copy of the final form of the franchise agreement.
– A copy of the Franchising Code.
– A disclosure document.
– A short document which outlines the rewards and risks of franchising.

Also, consider the following before signing the agreement:
– The details of the business (i.e., franchisor’s track record and success rate of other franchisees in the same business).
– Your rights and obligations (i.e., guidelines and costs when you sell the franchise).
– Fees you will be required to pay under the agreement (i.e., advertising fees, training fees, initial franchise purchase fee).
– What is included in the sale (i.e., your intellectual property rights and obligations?).

You can choose to terminate a new franchise agreement (not a renewal, extension or transfer) within seven days of entering the agreement or agreeing to enter into a franchise agreement; or making payment under the agreement. If you have made a payment, the Franchisor must refund this amount to you within 14 days, less the amount to cover reasonable expenses (providing the agreement includes this).


If you believe the matters discussed above are relevant to your business, please contact Darren Smith of our office to discuss further.

Darren is a Chartered Accountant with extensive experience, including working in the big 4 and medium sized firms before becoming a partner of a city based firm in 2000.

He has gained much experience and has extensive knowledge in providing business and taxation advice, superannuation planning, negotiation of sales and acquisitions of businesses and property development. His client base covers a wide range of industry groups.

Darren works with business owners to grow their businesses and create personal wealth within and outside of their business.

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