Details on the Franchisor
- For how long has the Franchisor conducted the
franchised business?
- Does the Franchisor comply with the Franchising Code of Conduct?
- Have you seen a disclosure document?
Evaluate the Franchise - Is it a new or existing franchise?
- Who are the major competitors of the franchise?
Evaluate the Financial Return of the Franchise - What is the total investment of the franchised business, considering the turnover, profitability levels and potential growth of the franchised business?
Payments by the Franchisee - What expenses are payable by the Franchisee? For example, initial franchisee fee, royalties, training fees, cost of equipment, trading stock, advertising levy, specific insurance required by the Franchisor, Franchisor's legal costs on assignment of franchise, insurance, etc.
Operating Costs of the Franchised Business - What costs are involved in operating the franchised business? For example, wages, employee entitlements, lease payments on equipment, telephones, computer software or hardware, signage, uniforms, insurance, rent and outgoings.
Term of the Franchise - How long is the term of the Franchise Agreement?
- Is there an option to renew the Franchise Agreement?
- What are the pre-conditions of renewal?
Business Premises
- Will the franchised business operate as a mobile business or as a business operating from fixed premises?
- Is the Franchisor offering a specific territory to the Franchisee? If so, is it exclusive?
- What competition is there in marketing the product or service in the designated territory?
- Who owns the premises?
- Will the premises be leased to the Franchisee directly or will the Franchisor take the head-lease and licence the premises to the Franchisee?
- Who will carry out improvements to the premises and when?
Products/Services and Equipment
- Do you have to purchase products from specific suppliers?
- Can you purchase products from other suppliers?
- Does the Franchisor receive rebates from suppliers?
- Are you restricted to only sell Authorised Products or to only perform Authorised Services?
- Is the Franchisee required to purchase any equipment from the Franchisor?
Minimum Performance - Is the Franchisee required to achieve a minimum level of performance? Is this level achievable?
Franchisor's Obligations
- What are the Franchisor's obligations under the Franchise Agreement?
- Do you have to work full time in the franchised business?
Franchisee's Obligations
- What are the Franchisee's obligations under the Franchise Agreement?
Training - Will the Franchisor provide initial and ongoing training to the Franchisee?
- Where is training held and does the Franchisee have to pay for training?
Intellectual Property -What is the Intellectual Property of the franchised business that will be licensed to the Franchisee?
- Trade mark(s)
- Business name(s)
- Website
- Operating Manual(s)
- Other
- Who owns the Intellectual Property?
Marketing - Will the Franchisor implement national or state-wide advertising campaigns?
- Is the Franchisee required to contribute to a Marketing Fund?
- What obligations does the Franchisor have in relation to applying the Marketing Fund to promote the franchise?
- How are enquiries from prospective customers to be allocated to Franchisees and are enquiries from a website to be handled in the same manner?
- What costs are taken out of the Marketing Fund by the Franchisor?
Assignment
- Does the Franchisor have a first right of refusal?
- Can you assign the franchised business?
Termination
- How can the Franchisor terminate the Franchise Agreement?
- How can the Franchisee terminate the Franchise Agreement?
Restraint
- Are the Franchisee and the Guarantor(s) restrained from operating a similar business to the franchised business?
- If so, how long for and within what area are the Franchisee and the Guarantor(s) restrained from operating a similar business to the franchised business?
Dispute Resolution
- What is the process for resolving disputes under the Franchise Agreement?
- Where is the dispute resolution to take place?
This article appears courtesy of
Mason Sier Turnbull,
franchise lawyers.
7-Sep-2007