When you picture Australia’s most successful businesses, their names and logos usually stick in your mind. If you have considered purchasing a franchise in the past, then these trademarks will become some of the most valuable resources you’ll have access to in your franchise asset pool. The right to use, and trade under, an established brand, such as Subway, means your franchise will benefit from the goodwill that has already been established. Franchisors are, understandably, very protective over their intellectual property, and new franchisees would be wise to seek advice from an intellectual property lawyer regarding the use of the trademarks of the franchise.
Under any franchise relationship, the organisation whose brand you will be using is known as the franchisor. On the other hand, the franchisee is the individual or organisation purchasing the rights of that particular franchise. If you’re looking to invest in a franchise it might be worthwhile speaking with a franchise lawyer first to get a better understanding of your rights and obligations as franchisee.
What are the advantages of running a franchise?
For the most part, potential franchisees, like you, will be purchasing an established business with its own methods and procedures. On top of that, you will be exposed to industry trade secrets and the valuable know-how of the franchisor, while taking advantage of the organisation’s branding and valuable goodwill.
Buying a franchise means you are in charge of running the business as if it were your own, but you benefit from using a tested model as a starting point to growing your limb of the franchise. It’s a good idea to ask a franchise lawyer to explain the risks involved in purchasing a franchise, as franchise lawyers are the professionals in the area.
What are some disadvantages of running a franchise?
In addition to benefiting from the brand power of an established organisation, there are several notable downsides to a franchise’s collective identity that a franchise lawyer can highlight for you. For example, if one Subway franchise gets in trouble for serving unsafe food, it is quite possible that other Subway franchisees will suffer as a result of this bad press. Unfortunately, this can reduce your sales, despite the possibility that the incident occurs in another state, for example.
When you’re starting up a franchise, the initial expenses can be quite high, especially for a large franchise branch in a sought after location. To make things worse, often the administrative requirements for keeping records and reporting can be very strict. Have a franchise lawyer explain these finer details so that you aren’t found liable for lousy bookkeeping. After some time operating as franchisee, you may become irritated at the monotony of the business’ operations, and feel limited by these restrictions. Even if you have no flexibility in how you run the business, make sure you’re getting your money’s worth by getting a franchise lawyer to review your franchise agreement for you and ensure the terms are fair and reasonable.
You might invest your time and effort into establishing an admirable customer base but once your franchise agreement comes to an end, you won’t necessarily be permitted to sell the business if a ‘buy-back’ clause forms part of the agreement. This clause essentially permits the franchisor to buy back the business after you have built it up to become profitable. Get your franchise lawyer to look over the agreement. You will want to know at the outset if a ‘buy-back’ clause is included. This is because the price at which your business is bought back by the franchisor is normally fixed at the commencement of the franchise agreement, which might not be a fair reflection of the business’ value now that you have built it up.
What is the franchising Code of Practice?
The Franchising Code of Practice controls the legal procedures and requisites that must be followed by all franchisors prior to entering a franchise agreement. The Code requires full disclosure by the franchisor of important details regarding the franchise. Once you have signed the franchise agreement, you’ll have a 7-day cooling of period to mull over the investment decision. In this time, it would be very wise to speak with a franchise lawyer to discuss the advantages and disadvantages of entering a franchise arrangement.
An expert franchise lawyer will negotiate the content of any franchise agreement and any related contracts before you sign anything, and use the 7-day period to verify the details of agreement.
If you’re considering becoming engaged in a franchise, there is much to consider in terms of whether it’s the right option for you. If you’re seeking the advice of experienced franchise lawyers, contact LegalVision on 1300 544 755 and speak with one of our skilled franchise lawyers today.