Franchising | The Franchisor’s interests are covered, but are yours?

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Buying a franchise business is appealing and can be a good way to start a business.   Immediate access to an established reputation and brand, big business buying power with marketing, a network of other franchisees and often support with operational matters can be some of the key benefits. 

The franchising process however can be complicated and due to its very nature involves multiple parties, at times with competing interests in the business. 

Prior to committing to purchase a franchise it’s important to carefully consider a number of legal and commercial issues, such as:

·        due diligence on the franchisor;

·        what is included and not included within the franchise fee;

·        experiences of other franchisees (current and former) with the franchisor and with operating a business in your chosen sector;

·        territory and marketplace assessments to maximise market share and minimise risk exposure;

·        entity structure for operational compliance and asset protection; and

·        termination rights and “step-in” powers of the franchisor.

The most common issue in franchising is a misunderstanding between the franchisee and the franchisor as to responsibilities and rights. Many of the rights and obligations of each party are expressly stipulated in laws and regulations and it is important that the franchise agreement reflects this and that you understand your role. 

It’s also important to remember that the interests of both parties will not always align. Understanding how and when you should be getting independent advice is critical.

At TSM we can assist you with all legal and commercial considerations in respect to franchising.   

Visit the link below for further details on how we can assist you.

Suzie Carroll