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Are you setting up a franchise business or looking to expand an existing franchise business? A specialist franchise lawyer can make this process a lot easier for you and reduce risks, as well as help to put the right pieces into place to make your goals reality.
Our team of franchise lawyers will prepare the necessary documentation and related paperwork. This includes preparing Franchise Agreements, License Agreements, and Franchising Code of Conduct.
We also provide legal advice to assist you to work out the best options for your unique set of circumstances. Obtaining the right legal advice is vital to grow your business efficiently.
The key difference between Franchising and Licensing is that Licensing is for the most part limited practically to the granting of use of the Intellectual Property of another in the course of otherwise operating a legally separate and unassociated business.
A licence can’t, according to the decisions of the Court, assert control over things such as the day to day operation of a licensed business and nor can it require a licensee to sell goods or services in a specific way or for a specific price without the license being deemed by default a Franchise Agreement.
Meantime Franchising, which is governed and directed by the Franchising Code of Conduct, which is a part of the Competition and Consumer Act 2010 (Cth), regulated by the Australian Competition & Consumer Commission, otherwise gives rights to a third party, un-associated business owner, to operate a business that is entirely pre-planned and holding a track record in regard to goods and/or services provided. A Franchise business, for the fees paid is also provided access and right to use the franchisor’s business name, intellectual property and operating systems (which varies depending on the franchisor) for an agreed period of time, in return for a fee and provision of a supply chain, plus assistance with advertising.
In summary, Franchises offer a more complete package, including an already established business model and framework for operation, marketing strategies and a well-established name and reputation. At the same time, Franchises can be more costly to both set up and run/manage due to the additional legal requirements to be met and the additional obligations on the Franchisor to the Franchisee to ensure continued supply of the support and services offered by the Franchise. A licence meanwhile is limited to use and access to, in general, only a well-established name and reputation, however are simpler to implement and oversee, as all that is required from the Licensor is to oversee appropriate use of the licensed assets, in exchange for the licence fee for the use.
An alternative to either licensing or franchising may be instead to create a new company or other legal entity and sell shares in that business to a third party. It is important however, and in these circumstances, to remember that this will therefore mean that all persons involved will share the risk and liability of that business and its operations, irrespective of the percentage of total shares held by any one person, especially if these same persons also share Director’s duties and obligations.
Further, and depending on how the shares are split between all involved, you will need to retain a majority of shares in order to retain a level of control over the assets etc that you have created and developed, which will be otherwise provided to the business for use. If not then the risk remains that business assets, in particular intellectual property, will be in essence stolen from or claimed as part of this business and may jeopardise other businesses using the same.
The franchise agreement is a legally binding contract that sets out in writing the rules of the agreement that the franchisee and franchisor have agreed to.
These rules often include fees and payments, terms of the agreement, rights and restrictions, obligations, marketing and promotion requirements, equipment and/or product purchases, dispute resolution and termination.
In short, no. You should not use a free franchise agreement template.
There’s always a risk to using a free Franchise Agreement template obtained online with the intention of making changes to it yourself. This is due to the fact that the template was not drafted with your particular situation in mind and may be missing a number of key areas that would protect your business.
Another risk might be that the template had been prepared for use in another jurisdiction (for example, America) and be against Australian laws.
Having the Franchise Agreement, License Agreement, or Franchising Code of Conduct drafted by a lawyer in Australia is best practice to ensure your business is protected to the highest degree possible.
There are several ways to terminate a Franchise Agreement, but it all comes down to what is written in the contract or agreement.
If there is a cooling off period, you may be able to terminate the agreement within this period.
A breach of contract may allow the franchisor to terminate the agreement, however dispute resolution procedures may need to follow, as potentially prescribed in the agreement.
Mutual agreement can also terminate the Franchise Agreement on mutual terms.
Many Franchise Agreements do not allow for early termination of the agreement and as such, it is important that you receive legal advice to review your agreement before signing, or to have a Franchising or Licensing Agreement drafted that meets your unique set of circumstances.
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