Australia’s franchise sector is one of the most lucrative in the world, with an annual turnover of $130 billion. One of the probable causes for this success is the level of effective regulation – we’re known for having the most comprehensive franchising legislation. The Franchising Code of Conduct is designed to protect potential franchisees from any unscrupulous conduct by franchisors, and requires the disclosure of important information to the franchisee. The Franchising Code of Conduct (FCC) has recently been updated, with new changes being implemented on 1 July 2010. These changes are designed to give new or potential franchisees information so that they can make a reasonably informed decision about the franchise they are looking to enter in to.
The FCC stipulates that a franchisor is required to give the potential franchisee copies of the:
– Franchise Agreement (in final form)
– Disclosure Document
– Franchising Code of Conduct
– Lease (if applicable)
The Franchise Agreement is presented as a contract, and related primarily to the relationship between the franchisor and the franchisee. As well as including a simple easy-to-read summary; it is required to clearly define a number of important areas, including:
– Any fit-out costs
– Conduct of the business and franchisee
– Dispute resolution process
– Future sale of the franchise
– Guarantees
– Insurance
– Obligations to maintain records
– Restraint of trade
– Termination (“end-of-term” discussion, which must begin six months prior to the expiry of the agreement)
The Disclosure Document, of which there are two varieties (one for franchises turning over less than $50,000 per annum, and one for franchises turning over more), is required to follow a certain format laid out by the FCC. The FCC stipulates that it must include:
– Earnings information of the franchise
– Establishment costs, and ongoing fees charged
– Franchise obligations: e.g. training
– The territory in which the franchisee is licensed to operate within
– What goods the franchisee is obligated to purchase from the franchisor
– What goods the franchisee may supply
– Whether there are any existing leases
Though this legislation may seem to place a heavy burden on franchisors; it actually protects and delivers benefits to both parties. Navigating your way through the franchising legislation may seem daunting; however at The Quinn Group we can assist you with every aspect. This ranges from preparing agreements and operations manuals to audits and the process of buying or selling a franchise. The Quinn Group can help to simplify the process of franchising, and provide you with understandable and practical advice. For more information submit an online enquiry, or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.
