What is Franchising Law?

Franchising law guides the rules and regulations governing the operation of franchises and focuses on the relationship between the franchisor (the owner of the brand and business model) and the franchisee (the individual or entity granted the right to operate a franchise location). Some key elements of this area of law include:

  • Regulation of Disclosure Requirements/Compliance: Franchisors must provide potential franchisees with a Franchise Disclosure Document (FDD) that includes important information such as fees, financial performance, and the franchisor's history. This is part of the broader laws governing Franchising in Australia under the Australian Consumer Law and the Franchising Code of Conduct.
  • Franchise Agreements and Other Documentation: This is the contract between the franchisor and franchisee detailing the terms and conditions of the franchise, including the rights and obligations of both parties, including in relation to termination and renewal. Franchise Documentation may also extend to licences to occupy premises leased by the Franchisor on behalf of the Franchisee, supply agreements and more.
  • Intellectual Property: Franchise agreements usually include provisions to licence franchise IP to the Franchisee, as well as protect the franchisor's trademarks, logos, and proprietary information.
  • Dispute and Litigation: Disputes often arise from breaches of contract, misrepresentation, non-payment of fees, territorial disputes, and disagreements over marketing and advertising. Mediation is a common first step in resolving franchise disputes. Where mediation fails, disputes may proceed to litigation, including taking the matter to court, where a judge will make a binding decision. Experienced franchise lawyers can provide valuable assistance in navigating disputes.

Starting a franchise involves several key legal documents to ensure compliance with laws and to protect both the franchisor and franchisee. The essential documents you will need are:

Franchise Agreement
This outlines the rights and obligations of both the franchisor and franchisee. It includes details such as the franchise fee, duration, renewal terms, territory rights, and operational standards.
Disclosure Document
This document provides comprehensive information about the franchise, including the franchisor's business history, financial performance, and any ongoing litigation. This will also include relevant financial statements or auditors reports.
Key Facts Sheet
This document summarises the most important aspects of the franchise, such as initial and ongoing fees, the term of the franchise agreement, and renewal conditions.
Operations Manual
This manual details the daily operations of the franchise, including standard operating procedures, marketing strategies, customer service protocols, and training programs.
Intellectual Property Registration
This includes registration of relevant trade marks, designs or patents (as required) and ensuring proper measures are in place for their protection and ongoing use, including relevant license agreements between associated entities.