What Is A Franchise Agreement? How Does Franchising Operate In Australia?

November 1, 2022    commerciallawyersinperth
What Is A Franchise Agreement? How Does Franchising Operate In Australia?

A franchise agreement is a form of a legally binding agreement that is entered into between a potential franchisor and a franchise. It helps to formalize franchisor-franchisee relationships and helps create legal obligations for both parties. But it is not the same as commercial contracts.

Many elements of this agreement are common across many franchise networks. As a result, it is possible to anticipate the standard terms your franchise agreement needs to include. Before you look to hire franchise lawyers in Perth, read the blog below to learn more about a franchise agreement in Australia.

How Is A Franchise Agreement Different From Other Legally Binding Agreements?

A contract at law needs to have the following basic elements:

  • Offer
  • Acceptance
  • Consideration

Under the context of commercial transactions like a franchise agreement, you need to infer that both parties enter into the contract to ensure the agreement is legally binding. When you offer a franchise the license and rights to operate a business in your franchise network, you will also offer them the chance to leverage your established intellectual property to form a profitable business.

In exchange for that, a franchise needs to agree to the payment terms and other terms that are given in the agreement. The Australian Consumer Law principles that apply to a general commercial contract must also apply to a franchise agreement.

Before calling in a reputed franchise lawyer, you need to know about the franchisor-franchisee relationship. By nature, this relationship has less bargaining power. This is why you must be transparent and act in proper faith in all franchise interactions.

The Franchisee And Guarantors of A Franchise Agreement

There are three important ways a potential franchisee enters a franchise agreement with you. They can easily do so in one or the other capacity given below:

1. Sole Trader

At the most simple level, a franchisee might want to enter into a franchise agreement in their own personal capacity. This can either be as a lone trader or in a partnership with another person with a corresponding ABN,

2. Corporate Franchise

A company can be considered a legal entity in its right and can also be separate or different from its shareholders and officeholders. In accordance, a company can enter into contracts and begin legal proceedings.

Based on the accountant and business advisor’s advice, a franchisee can often choose to enter into a franchise agreement as a corporate franchisee. They can also include a company for this reason to limit their personal liability.

3. Corporate Trustee

A franchisee can also opt to elect to create a better business structure. For instance, this is where your company will enter into the franchise agreement as a trustee of the family trust. These arrangements can help benefit the franchise from the perspective of asset protection.

Who Is A Guarantor To A Franchise Agreement?

In any circumstance where the franchisee wants to enter into a franchise agreement in the form of a corporate franchisee, there are risks that the company can default on its obligations under this agreement. In such cases, you cannot pursue the shareholders or directors without a proper and direct contractual relationship with these people.

You will be able to manage the risks properly by needing directors to be a party to the agreement in the form of a guarantor. When a guarantor is a party to a franchise agreement, you will be able to create a direct contractual relationship with a person who can personally guarantee to fulfill the franchisee’s obligations if the franchisee fails to do so.

What Are The Standard Terms Of A Franchise Agreement?

There are many people who hire franchise agreement lawyers for the case of a franchise agreement. A franchise model’s different features are common to all franchise networks. However, there can be some changes to suit a specific franchise.

You can expect your franchise agreement to have standard terms that deal with the following:

1. Intellectual Property-

Your franchise agreement needs to include terms that can allow you to safeguard your intellectual property. The franchise’s intellectual property must include all your unregistered and registered trademarks, copyright and private information.

2. Royalty Fees-

You will be entitled to charge a royalty fee during the franchise agreement term. This is a recurring payment that you can expect to receive from the franchisee every week, fortnight or month. The royalty fee can also be expressed as a fixed monetary amount.

3. Term and Renewal-

You need to be clear from the outset regarding the period in which a franchisee will have a franchise right for any specific territory. The right to renew the franchise can also provide a good incentive for the potential franchisee.

4. Occupation Of The Premises-

You will be able to nominate whether you need the franchisee to locate the business premises themselves or any criteria the premises need to meet. If you prefer to hold the lease directly, the agreement must include terms requiring the franchisee to enter into a license to occupy the premises.

Execution Of The Franchise Agreement

Where a potential franchisee has elected to enter into the franchise agreement as per their capacity, they need to sign the agreement next to their legal name before a witness. But if a franchisee looks to get into a franchise agreement in the form of a corporate franchisee or a trustee, it is essential to execute the franchise agreement in the following ways:

  • Companies with a sole director need the signature of the sole director.
  • Companies with more than one director need the signature of one of the directors and the signature of the company secretary or other directors.

These rules will also apply when executing the agreement in your capacity as the potential franchisor with the help of a commercial law firm in Perth. You may also need to complete other relevant steps while executing the agreement.

Contact Commercial Lawyers Perth

If you made a franchise agreement, you need to hire reputed lawyers in your area to help review them. Contact Commercial lawyers Perth WA, to access the best franchise lawyers in the area who can help properly review your agreement. They can also provide the best legal advice to the franchisor and franchisee for their rights and obligations under the agreement.

REQUEST A QUOTE NOW! Complete the form below for a fast response


Related Posts
  • Commercial lawyers Perth WA team did a great job for my settlement. Very professional and friendly lawyers in Perth . My queries were always answered and were just a call away . Highly recommended commercial lawyers in Perth , Western Australia!

    Preet Kamal
  • Commercial lawyers Perth team did a great job for my settlement. Very professional and friendly lawyers in Perth . My queries were always answered and were just a call away. Highly recommended commercial lawyers in Perth , Western Australia

    Kado
  • Commercial Lawyers Perth WA did a great job for my settlement. Very professional and friendly lawyers in Perth. My queries were always answered and were just a call away. Highly recommended commercial lawyers in Perth, Western Australia

    Takudzwa Nyamhamba
Commercial Lawyers Perth Wa Have Been Helping You Take Control Of Your Outcome.
Copyright © Commercial Lawyers Perth.
All Rights Reserved
Enquire Now
Call Us Now