As a franchise buyer, it’s crucial to understand the steps involved in obtaining and handling your franchise documents. Here are some tips to help you navigate this process effectively.
When you get the documents
Once you have chosen a franchise brand and gone through an initial screening process, expect to sign a confidentiality document. This is a standard requirement to protect the franchisor’s sensitive information.
The franchisor will then furnish you with the following essential documents:
- Disclosure document
- Franchise agreement
- Copy of the Franchising Code of Conduct
- Information statement
These documents, including the final form of the franchise agreement, must be given to you at least 14 days before starting, renewing, or extending a franchise agreement, or paying a non-refundable deposit.
What to do next
Read the documents! It sounds obvious, but franchise buyers can be deterred from reading the documents by their length; franchise agreements in particular can be long and detailed. However, this is the crux of your business, so you need to know what’s involved.
You can highlight areas of concern or clauses that need clarification and speak to experts to get more detail.
Seek professional advice
While franchising is part of small business, it has its own peculiarities, so always source advisors who are experts in the franchise field. They will be more cognisant of the details in the documents, and understand the nuances.
Financial
An accountant will review the financial aspects of the franchise agreement and disclosure document and may help you create financial forecasts to assess the business’s potential growth and return on investment.
Legal
It’s essential to turn to a franchising lawyer to ensure the documents comply with the Franchising Code of Conduct and current laws. A lawyer can verify the information in the documents, search government and court records and recommend amendments to protect your interests [franchisors may or may not accept or negotiate any amendments].
Do your own due diligence
It’s important can check online for information and any negative feedback or publicity about the brand.
Speak with existing and former franchisees to hear first hand about their experiences with the franchisor.