It is vital to get the right advice when buying a franchise. A good franchise should guarantee a hard working owner an excellent return. That isn’t always the case – there are many traps for the unwary. We are experienced Adelaide franchise lawyers with a reputation for being good communicators. Read our Client Reviews and then talk to us about your franchise matter on a no obligation basis.
Benefit From Our Experience
Carol and David ultimately purchased a well known franchise and enjoyed many years of business success. The franchise that they originally intended to buy may have proved disastrous. Carol and David were surprised to find out that they were only buying the remainder of the franchise term. In less than 7 years they would have no further right of renewal and they stood to lose their business and their $250,000 investment. At the end of the 7 years the restraint of trade and non-competition clauses in the franchise agreement would prevent them from dealing with their customers or working in the same industry. The strict contractual nature of the franchise arrangement was spelt out when they asked the franchisor to guarantee a further renewed term – the answer was “no”.
The new Code applies to all franchise agreements entered into after 1 January 2015 and whilst the Code effects some content of agreements it does not standardise them. All franchise agreements are different. See our article on the necessity of Independent Legal Advice Before Buying a Franchise Business. Find out more
Indicators of Franchises to Avoid
In my experience there are a number of warning signs for prospective franchisees. They are:
- If you have been lucky enough to “get in on the ground floor” by being one of the first franchisees for a new business idea. From a franchisee’s perspective the whole idea of buying a franchise should be to step into a tried and tested successful business model that is guaranteed to work if the system is followed. Avoid the temptation to be a pioneer when it comes to buying a franchise;
- Bad press about the franchise or one its directors;
- Talk to existing franchisees and, if possible, past franchisees. If the general feeling is negative it might be a good idea to look for another franchise system;
- If the number of years left in the term (including any renewed terms) is very limited;
- Where the franchise agreement includes minimum sales requirements that are clearly unrealistic given sales figures of similar franchises within the group;
- The franchisor has not provided you with an up to date and complying disclosure document, a draft of the proposed franchise agreement and a copy of the Franchising Code of Conduct as required by the Competition and Consumer Act 2010;
- If the terms of the franchise agreement are clearly unreasonable.
Successful Franchise Business
Buying a franchise is of course only one component of a successful business. We can also advise you in relation to:
- The most appropriate ownership structure to purchase the franchise to protect your investment and your other assets and to minimise taxation obligations during the ownership of the franchise business and upon its sale;
- Leasing of commercial premises;
- Financing documentation; and
- Employee issues.
We have significant experience with most franchise systems. We have acted for many franchisees that now own businesses within the most successful franchises in Australia. Contact us on a no obligation basis.
Read our Client Reviews and then talk to us about your franchise matter on a no obligation basis.