Why you should keep your franchise documents

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Inside Franchise Business: keep your franchise documentsBuying a franchise is exciting and one of the biggest decisions you may make in your lifetime. Much investigation, thought and consideration goes into the decision making process.

Along the way you will no doubt receive from the franchisor a number of documents, including a disclosure document, franchise agreement and, if the franchise operates from fixed premises, the agreement giving you the right to occupy the premises (e.g. the lease and/or occupancy licence).

Given that franchise agreementsand occupancy agreements are typically lengthy documents after you have signed them it may be tempting to file them away and hope never to have to see them again. 

However, you will need to keep the documents and no doubt have to refer tosome or all of the documents at some point during your franchise. 

So you should keep the documents in a safe and easily accessible place.If you have hard copies of the signed franchise documents you should consider scanning and storing them electronically.

During the term of your franchise you may need to refer to your franchise agreement in the following circumstances:

  • if you have an option to renew the franchise and you wish to exercise your option, you will need to refer to the franchise agreement to determine the process to apply, in particular the dates by which you must exercise the option to renew.  Failure to exercise the option to renew within the dates specified in the franchise agreement may have fatal consequences.  The franchisor will be under no obligation to renew your franchise and you will be at the mercy of the franchisor at the expiry of the initial term.
  • if you wish to sell your franchise in the future you will need to refer to the franchise agreement again to determine the process you will need to follow and the transfer fee payable;
  • if an issue arises with the franchisor you may wish to invoke the dispute resolution provisions in the franchise agreement.  The franchise agreement should be the starting point in dealing with any dispute as it will set out the process to be followed.

If your franchise operates from a fixed site the lease is another key document that you will need to reference from time to time. 

You may need to check the timing and mechanism of rent reviews. 

As with the franchise agreement,if there is an option to renew the lease and you wish to exercise such option, you will need to refer to the lease to determine the process you will need to follow and the critical dates.  Missing these critical dates could,mean you have a franchise but no premises from which to operate.

In addition, if you find yourself in dispute with the franchisor or the landlord, thedisclosure document, franchise agreement and the lease and/or occupancy licence will be the key documents that your lawyer will need to review.

These documents should be kept at least for the life of your franchise. 

You should also keep all other documents relevant to your franchise, including communications with the franchisor and the landlord, documents and reports required to be provided under the franchise agreement which may include financial information, tax returns and employee records.

Setting up the right record keeping system for your franchise will help you work more efficiently and address issues relating to your franchise if and when they arise.

Raynia Theodore

Raynia is a principal at MST Lawyers and has extensive experience in corporate, franchising and leasing law. Her clients include major national franchisors and franchisees.  View More...
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