Buying a franchise business may well be one of the biggest decisions in your lifetime.

The decision to buy a franchise requires thorough due diligence and research of the franchise network, including speaking to existing and past franchisees and most importantly understanding the franchise agreement and other documents you will be required to sign.

1. Find the right lawyer

Franchising is a unique area of law, and it is important that the lawyer you engage to work on your franchising matters is experienced in franchising law.

Franchise agreements are not just another contract – they are usually complex lengthy long term agreements and there are additional considerations when buying a franchised business including:

• specific regulatory requirements – the Franchising Code of Conduct, imposes certain obligations on franchisors when granting franchises and when an existing franchisee is selling a franchised business;
• if the franchise is an existing business, the franchisor may have first right to purchase from the vendor franchisee;
• the franchisor will have a process that must be  followed when buying an existing franchised business.

Using a lawyer experienced in franchising will save you money both in terms of the review of the franchise documents and in handling the purchase transaction because an experienced franchising lawyer will be familiar with the legal requirements and processes that are unique to franchising.

2. Get the right advice

Not every franchise document will need to be reviewed. At a minimum, your lawyer should review the:

• Franchise agreement;
• Disclosure document;
• Sale of business agreement (if applicable);
• Lease of your premises (if applicable);
• Occupancy licence agreement (if applicable).

A lawyer experienced in franchising will be able to advise you on the important aspects of the agreement, including:

• Payments, operating costs and unforeseen capital expenditure.  Fees are normally specified in a schedule at the end of the franchise agreement and in the disclosure document. However, some fees (or a franchisor's ability to change the fees) can be inconspicuous within the agreement.
• Term and renewal.  Any options to renew the agreement for further terms may have preconditions attached, such as the payment of renewal fees, refurbishment requirements or other terms that will require you to spend further money. Ideally the term of the lease of the premises should match the term of your franchise agreement.
• Territory.  Your territory may be exclusive or non-exclusive. Even with exclusive territories there may be exceptions or significant rights may be reserved by the franchisor and/or granted to others.  
• Minimum performance criteria.  You must understand any minimum performance criteria and the consequences of failing to meet them.
• Termination. Understanding the grounds for termination is imperative, because franchisors generally have far more grounds to terminate than do franchisees.
• Restraints. Most agreements provide for a restraint period at the end of the term. This can limit your options after the end of the franchise agreement.

3. Give your lawyer what he or she needs

Reading all of the documents, considering the legal issues and providing the advice you need takes time. Make sure you provide your documents to your lawyer early to allow enough time for them to do this and respond to your lawyer's queries as soon as you can.

4. Negotiating amendments

An experienced franchising lawyer will highlight clauses that are contrary to the Code and clause that are onerous or unusual and will only negotiate with the franchisor to amend these; he or she will not waste time and money advising on clauses that are commonplace in franchising.

5. Further advice

Your lawyer can also provide advice about:

• asset protection and personal guarantees
• structuring
• employment law
• privacy law
• consumer law compliance

You should choose a law firm that can provide advice about all issues. This will streamline the process and is another way you can avoid a big legal bill.

Buying a franchised business usually involves a significant initial investment and substantial ongoing liability. 

The cost of engaging a franchise lawyer before you purchase is insignificant when compared to the amount of the initial investment and risks. 

The costs will also pale in comparison to the costs if you end up in dispute or even worse litigation with the franchisor. So don’t skimp on the costs of obtaining proper professional advice before you buy a franchise.