Receiving a franchisor’s franchise agreement and disclosure document for the first time may be a daunting experience, given the sheer volume of the documents.

It is always prudent to have these documents reviewed by a lawyer with expertise in franchising, who knows their way around such documents and can cut through and advise you on the key rights and obligations of the franchise agreement.

Whilst it is vital to have a full understanding of the key terms of the franchise agreement, such as the duration of the agreement, fees payable, the territory (if applicable) or circumstances in which the agreement may be terminated, your lawyer should also advise you on the commercial implications of the franchise agreement. This requires a little more reading between the lines. The implications may include:

• What happens if you wish to sell the franchised business?
• Are there other arrangements which need to be in place during the term of the franchise agreement, such as a lease or an occupancy licence, and how do these affect the tenure of the franchise agreement?
• If you are granted a territory, is the territory exclusive to you and are there any circumstances in which the territory may be reduced or changed?
• Who owns the intellectual property and what happens if you develop or improve it?
• What happens at the end of the franchise agreement?

In addition, a franchising lawyer can advise you on whether the Franchisor’s franchise agreement and disclosure document comply with the Franchising Code of Conduct (“Code”), and advise you on your rights under the Code (which may not necessarily be contained in the franchise agreement). For example:

• Has the franchisor provided you with a 14 day disclosure period?
• What are your cooling-off rights?
• Is the franchisor’s disclosure document up to date?
• Have you received a copy of the lease or occupancy licence (if relevant) within the time frames specified in the Code?
• What are the notice requirements if you wish to renew the franchise agreement?
• What happens if you breach the franchise agreement?
• What happens if you have a dispute with the franchisor?

It is obvious from the above that simply reading the franchise agreement is not sufficient. An understanding of what is expected of you under the franchise agreement as well as what your rights are under the Code will help harness your relationship with the franchisor.

This understanding should also contribute to the smooth, and hopefully successful, running of the franchised business.

Marianne Marchesi is an associate at MST Lawyers