What is a Franchise Agreement?
Those with a keen eye for business understand how successful a franchise can be under the right circumstances and with the support of experienced franchisors. After all, running a franchise gives you an opportunity to build a business under an already-established brand name, with instant access to successful marketing ideas, management, and business models. However, it is important to remember that success starts with the right franchise agreement. If you wish to achieve all the success you aspire to, ensure that you're singing a contract that is legally sound and will provide you with the support necessary to build a winning franchise. How do you know if your franchise agreement will give you the freedom and resources to realise your business goals?
Ask yourself these four questions:
1. What exactly are the terms?
A sound franchise agreement will spell out everything in detail - from the amount of capital required up-front, to the annual fees you're liable for and what happens if your agreement needs to be transferred or terminated. Chances are you won't be able to make complete sense of this all by yourself. That's why you should talk to a lawyer before you sign anything. That way, you'll understand everything without having to worry about any surprises popping up later.
2. Does this agreement comply with Australia's Franchise Code of Conduct?
The Australian Competition and Consumer Commission created a Code of Conduct in order to make sure that franchisors were acting fairly and that disputes had a fair way of being resolved. Any franchise agreement you sign has to comply with this Code. And, your franchisor is required to give you a copy of the Code at least 14 days before you sign your agreement.
3. Are you comfortable with the terms?
A suitable franchise agreement is like a marriage - both sides have to work at it. Just like a marriage shouldn't be one-sided, neither should a franchise agreement. Additionally, just like you wouldn't want a dictator for a spouse, you don't want one as a franchisor. If your franchisor refuses to give you any concessions in your agreement, it could mean they'll be difficult to work with down the road.
4. Are you really ready?
Even after you sign your franchise agreement, you still have 7 days to get out of it. That's because each agreement comes with a "cooling off period" - during which you can void the deal altogether, make modifications to your agreement, or delay paying any money that you owe. But once those 7 days have passed, you are legally bound to everything you agreed to - so it's important to make sure that you're completely comfortable.
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