A franchisor creates a network of franchisees to systematically build a brand and reputation that accompanies a credible and well-established business. Those that become a part of this network uses and benefits from the brand, its reputation, and management systems. It enables branching out into new product areas, widens the scope of the brand and expands the business model.
This process of growth and expansion needs to be backed by a robust compliance system, without which it will not be possible to achieve the desired business targets. A franchise attorney is an expert who can educate you about your compliance responsibilities. Here are a few questions you need to ask yourself if you want to become a franchisee.
You need to remember the primacy of the operations manual. In case, the franchisor denies you the right to review the operations manual before signing the agreement, request to view it at the franchise headquarters.
Reading the disclosure document is critical as it enables you to make sure that a particular system complies with the Code of Conduct. If you find that you cannot grapple with these issues yourself, do not hesitate to ask a franchise attorney to help you.
Here is a check-list that will help you determine whether the franchise system is compliant:
An agreement (regardless of the name), that satisfies the overall definition of an agreement as per the Code, will be governed by the franchising Code. It means that any agreement (written or otherwise) that abides by a set of management rules, pays regular fees and uses the trademark of an established company to run its operations is probably a franchising business.
Franchising, like other commercial relationships, works within the framework laid down by the Australian Competition and Consumer Commission. It is a watchdog over non-compliance. Any breach in compliance is subject to hefty penalties such as fines. If you have any doubt about the compliance aspect of the franchisor system you are working under, consult your franchise solicitor to avoid being liable to penalties.
It is true that when the franchisors are non-compliant with the systems that comply with the law, it is their fault. But this may result in them being made to introduce a robust compliance agenda that affects the franchise system working under them, that you are part of.
It is essential for you to be well-versed with the code that applies to your franchise business. The Code is your franchising bible. It provides you guidance and makes you aware of your rights and responsibilities as a franchisee. Try to get complete details about the working of the franchise system from the ex-franchisees who have run their business successfully.
They can provide invaluable insight into how the system works and the things you need to be looking at to keep your bases covered. In turn, this will help you make a well-informed decision and embark on your franchising venture with your eyes open.
When you perform due diligence before entering into a franchising agreement, it helps you avoid pitfalls and gives you a solid footing. You will be more confident while entering the system and will be able to make an early success of your franchisee venture.
Thanks for reading,
The Franchise Institute Team
1300 855 435