Franchising is a business model where you (the franchisor) grant to another person (the franchisee) the right to market your brand and provide your particular goods or services in the way you require. The two parties enter into an agreement in which the franchisor licenses to the franchisee the right to market a brand and operate a business in accordance with the processes and systems of the franchise system. The franchisor will generally licence to a franchisee the right to use a particular franchise concept, trade marks and brand names, marketing, service and production methods.
Franchisors must provide a franchise agreement and disclosure document to prospective franchisees, along with other documentation such as an operations manual. In cases where there are premises involved, a lease or licence for the premises. These documents must comply with the Franchising Code of Conduct and set out exactly how the franchise will operate. It is vital that franchisors work with an experienced franchise lawyer when drafting or amending franchise documents. In a similar vein, it is important for prospective franchisees to ensure that the franchise documents they will be signing have been reviewed by a franchise lawyer.
Deciding to franchise your business or buy into a franchise network is a big commitment that attracts a unique set of challenges. Do your homework, research other businesses that have franchised successfully and familiarise yourself with your obligations to ensure your franchise thrives. Above all, identify experienced and trusted advisors who can take you through the process and help you to avoid the mistakes of others.