Documenting the franchise relationship

As franchising is fundamentally governed by the terms agreed between the parties, the franchise agreement is the cornerstone of the franchise relationship. The franchise agreement describes the legal relationship between the franchisor and the franchisee and sets out their respective rights and obligations. It contains information relating to the establishment and identification of the franchisor’s proprietary interests, nature and extent of the rights provided by the franchisor and the obligations of the franchisee.

As every franchise system is different, each franchise agreement will be different.

Although there are standard issues to be dealt with, franchise agreements are not standard form documents. They must be tailored for the specific and distinct requirements of each franchise system. A lawyer experienced in franchising should be engaged to draft the franchise agreement.

In addition to the franchise agreement the franchisor may need to prepare the following documents:

· Preliminary marketing information to be supplied to prospective franchisees

· Application documents to be submitted to the franchisor at various stages by an interested party. These may include an application form and a confidentiality agreement

· A disclosure document and other documentation required to be provided under the Franchising Code of Conduct

· Personal guarantees, covenants and ancillary documents to the franchise agreement; and

· Premises documents such as a lease, sub-lease or licence

There may also be documentation relating to any credit arrangements or finance, and documentation relevant to any vehicles, equipment, computer systems or other items which form part of the franchise agreement.

Read on in regards to Franchise Council of Australia is a not for profit membership organisation that is the peak body representing the franchising sector in Australia.