Business Franchise Australia & New Zealand — May-June 2017

i have both franchisors and

franchisees as clients in my

legal practice. Although there

is much more work involved

in setting up a brand new

franchise agreement than

in reading one, it can be

difficult to give advice to a

prospective franchisee.

They may be under pressure to sign up, and

may lack experience. Maybe they have never

run a business before, or attempted to read a

complex contract like a franchise agreement.

They have a lot to learn, and have to do it

qu ick ly.

Together with the franchise agreement,

they will also have to read the franchisor’s

disclosure document, and possibly also a lease

and a disclosure document for the lease. They

show me these and ask: “Can you tell me if

there is anything dangerous in these?” Where

shall we begin?

The approach I take with my franchisee

clients, and which I am passing on here, is

this: you can’t afford to be ignorant. You

have to come to grips with the franchise

agreement and understand how to comply

with it. The wrong time to find out what you

were supposed to do is when you are having a

costly dispute with the franchisor a couple of

years later. The same applies to your lease and

indeed to every contract you sign.

The disclosure document is a helpful

summary, in plain language, of the major

provisions of the franchise agreement,

packaged together with other important

information. But it doesn’t always match up

precisely with the franchise agreement. And,

the disclosure document is almost always

excluded from being part of the franchise

agreement. Basically, you can’t avoid learning

what the franchise agreement says.

exPert Advice

hoW to

read your

FranChise

agreement