May 16, 2023

The Importance of a Strong Franchise Agreement for Your Business Success

In the current scenario, one must have heard the terms’ franchise’ and ‘franchisee’ whether or not they relate to the financial sector. Everyone in the online and offline world knows about the global pizza chains or coffee joints, which are often franchises taken by individuals in different countries. If you are considering doing the same, consult with the most franchise agreement lawyer in Perth before committing to legal documents.

Moreover, a substantial franchise document is also necessary for the original owners; as their brands, logos, and other non-consumable assets fall under intellectual properties, only they can exploit.

There, the people standing on either side of the scale should put the needed impression on the agreement they reach with one another.

Knowing The Terminologies In Detail

A franchise agreement is a legal, binding agreement between the ‘franchisor’ and the ‘franchisee.’ The former grants permission to the franchisee to utilize exclusive rights for all their products, proprietary marks, and services for a set time. In exchange, the franchisee must pay a sure profit or share a specific revenue percentage to the franchiser.

Essentially, the franchise contract shall define the brand name, the time length of the franchise agreement, guidelines, and clauses related to penalty provisions (including compensation, fines, and cancellation of the contract).

The definitions of franchisee and franchisor are also detailed below:

Franchisor

The company is granting another business particular permission to use their services, products, and proprietary marks for a fixed time. Usually, these are mentioned in the franchise agreement.

Franchisee

The business, commercial establishment, or individual entity secures the right to the franchise name and markets the services and products for its franchisor.

In Australia, the franchise market has been blossoming since the 1970s and has seen the most growth since the 1980s. Industry experts consider the situation to be past its maturity. Till now, the country has over 1,100 franchisors, 65,000 franchise units, and 8000 units owned by companies.

The start of new Australian systems and the expansion of the existing systems have increased competition in the field, creating a demand for quality franchises, whose collection is progressively becoming smaller. Attracting investors or prospective partners interested in master franchise opportunities has become more challenging.

Therefore, consulting with the most experienced business settlement lawyers in Perth, WA, before entering into a franchise agreement would be helpful in the long run.

Characteristics Of A Strong Franchise Agreement

A franchise agreement is a contract by its inherent nature, but it still needs the attention of an experienced lawyer for a small business franchise in Perth. It is significant for small-business franchisees, as a multinational franchise will have the power of money, politics, and workforce behind it. So, both parties should check their agreement for the following:

1. The clarity in the indicated reason

The agreement should state clearly the different conditions and the actions to be taken / procedures followed in case of an event. It shouldn’t create confusion on the conditions of rights, commitments, and relationships between the franchisor and the franchisee. Moreover, there shouldn’t be doubt or overlapping about the franchisor’s and franchisee’s rights and duties.

2. Loophole-free character

Most of the time, it is observed that a small business owner taking the franchise of a well-known and big-name company gets the most negatively affected because of a situation because their contract contained a cleverly disguised loophole shifting all the blame from the franchisor company. The franchisees should get the contract checked with practicing business lawyers to avoid getting legally blindsided.

3. Unambiguity

The guidelines, conditions, charges, and provisions should be mentioned clearly in the franchise contract for both parties. The writing shouldn’t confound the action and the party responsible for taking it. Mentioning all the information in the contract reduces any chances for errors or omissions.

The most dependable business lawyer of your choice will optimize this aspect of your franchise agreement and enhance its ‘quality’ and transparency. Still, you can check the following points to ensure that you are getting a just deal from your end:

4. Charges payable to the franchisor

This aspect would include the stable fee paid in the franchise settlement with detailed information and appropriate data for paying the money. Incidentally, these charges can change according to the franchise location or if it needs any changes because of the prevailing health standard or codes followed by the state or country of the new location. A learned business franchise lawyer will help you follow these regulations properly.

5. Domain strategies

The franchisor and the franchisee may have to work on specific web resources together. The contract should contain details about the ownership of the domain and the distribution data of its profits correctly mentioned.

6. Amenities delivered by the franchisor

The franchisor has definite responsibilities to carry out in the charter agreement. The services delivered by the franchisor must be specified accurately. For example, one of the services that the contract would include is training the staff on utilizing the foodstuffs and apparatus of the franchise.

7. Restoration of contract

The contract should mention the apparent renewal date and define the conditions the franchisee must fulfill for renewal. Usually, the time ranges between 5 to 20 years.

8. Transfer Rights

It is usual for franchisors to commonly maintain the authority to approve any terms for exchanging or transferring rights. It allows them to determine owning the privilege of refusing a franchise or purchasing it back.

You must consult the most knowledgeable business lawyer Perth you have chosen before proceeding with any franchise contract.

Importance Of Having An Ironclad Franchise Agreement

Franchise agreements are complex, but it is necessary to have one because of the structure it provides. Indeed, not all conditions of the original company can be implemented. Still, having the guidelines in writing and agreed upon by the franchisor and franchisee can save a lot of legal headaches afterward, as explained below:

  • As a purchaser, you have the right to know about your acquisition. A franchise agreement will help you understand the new permission’s ongoing investment, projected profits, and risks.
  • The franchise contract would help you protect your brand as a franchisee, just like it does for the franchiser. You will be responsible for all business aspects, including the visual identity, website, and branding. A strong franchise agreement will save you future legal battles over these areas.
  • As a franchisee, the franchise agreement can outline the ongoing support you will receive from the franchisor, mainly in the starting years. The franchisors are usually more experienced players in the field and have many optimized and refined tools and resources.
  • You can access training, marketing support, and even marketing budgets up to a certain amount. You can negotiate with the franchisor to get extra support in an area with less experience. For example, if you need assistance with food safety training, you should mention it in the franchise contract and receive it.

In conclusion

A legal document is essential for protecting oneself and their business partner, irrespective of your position as the franchisor or the franchisee. It helps to avoid costly legal cases down the road, as well as negotiate with more confidence.

Therefore, employing the most recommended business franchise counselors will help you manage your business without stress.