Franchising is a form of business enterprise where a company (the franchisor) grants to the franchisee the right to use a name, a product or a process in return for a fee.
A franchise agreement may place limitations on your sales territory, your right to own a similar business elsewhere, your marketing strategy and the suppliers you use. It is important to discuss any franchise agreement with your lawyer before signing as the unwary franchisee can face many problems and hidden costs.
All franchise agreements renewed or entered into after 1 October 1998 must comply with the Franchising Code of Conduct.
The code of conduct requires franchisors to disclose information about their business experience and provide a summary of both parties’ obligations. A franchise agreement should contain:
- The fees you will pay
- The length of the franchise
- The level of control the franchisor can exert over the business
- The licence to use the trademark or business name