A franchise agreement is a contract (written, verbal or implied) under which:
- one party (the franchisor) grants another party (the franchisee) the right to carry on a business in Australia supplying goods or services under a specific system or marketing plan substantially determined, controlled or suggested by the franchisor or its associate
- the business is associated with a particular trademark, advertising or a commercial symbol owned, used, licensed or specified by the franchisor or its associate
- the franchisee is required to pay, or agree to pay an amount to the franchisor or its associate before starting or continuing the business (this excludes certain payments).
If an agreement meets this definition, it will be covered by the Code regardless of whether it’s referred to as a ‘franchise’ or not.
Franchise Agreements Australia
Australia is the most franchised country in the world. The growth in franchised businesses in Australia has been enormous. This is where Franchise Agreements become important to your business model.
Franchising Agreements are an essential requirement for the expansion of the scale of a business in Australia.
Franchising is heavily regulated in Australia. This contains both positive and negative aspects. The positive side there are many avenues for franchisees to seek compensation and redress in the event that things go awry. The negative there is a large amount of legal red tape. A Franchising Agreement is a very important part of your business.
There are many different types of Franchise Agreements available and is important to get one that is right for your business.
Franchise Agreement + Schedule
This Franchise Agreement covers matters required by the Franchising Agreement 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
19 pages long.
Franchising Information Statement
On 1 January 2015 the new Franchising Agreement 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.
Franchising Disclosure Statement
On 1 January 2015 the Franchising Code was repealed and replaced with the Disclosure Document 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;
- That limits significant capital expenditure ;
- and limits end of term restraint of trade covenants ;
- limits nominating a jurisdiction for dispute resolution ;
- 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 Agreements Practice Guide (available soon)
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, Practiceguides.com.au