Three great reasons to review your franchise documentation and processes
by
Norton Rose
In conducting these reviews we have come up with a few common issues:
- Out of date provisions and incorrect wording for current practices;
- Unrealised opportunities for additional revenue streams or cost recovery when compared to current industry best practice;
- Insufficient acknowledgement of the franchisor’s responsibilities in the franchise agreement, leaving the franchisor open to an allegation that a term should be implied to give the document business efficacy;
- Potential vicarious liability of franchisors for acts of the franchisees due to overly broad definition of system’s compliance obligations;
- Incorrect characterisation of franchisee exit transactions in the disclosure document;
- Incorrect inclusion of financial information in the disclosure document;
- Poor risk management processes in relation to franchisee recruitment, particularly in relation to the provision of financial information;
- Use of documents which purport to minimise risk in relation to representations, but which are ineffective in the context of the Trade Practices Act;
- Poor risk management in relation to franchisee to franchisee transactions;
- Inappropriate use of breach notices as a day to day management tool; and
- No professional indemnity insurance, or insurance that does not provide adequate cover.
This article appears courtesy of Deacons Lawyers . 14.09.2007
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