In certain circumstances, franchisors are required to provide franchisees with a copy of the disclosure documents in the required form.

For example, if you are considering entering into a franchise agreement as a franchisee, your prospective franchisor is required to provide you with a copy of the Franchising Code of Conduct (the Code), the final form of the proposed franchise agreement and the most up-to-date version of the disclosure document. All of this should be provided to any prospective franchisee at least two weeks (14 days) prior to:

  • Signing a franchise agreement or any agreement to enter a franchise agreement; or
  • Payment of any monies that is ‘non-refundable’ to anyone associated with the franchise (franchisor or some associate).

In addition, when a franchisor approaches a franchisee towards the end of the Intial Term with the intention of renewing, extending or broadening the scope of the terms of the franchise agreement, you should consult your franchise solicitor. You should also be given the above documents 14 days before agreeing to any renewal or extension.

Long-form documents

You may need to seek advice from a franchise solicitor to verify which documents you are entitled to. Some franchise agreements will provide long-form disclosure documents, which the franchisee must enter into pursuant to the terms of the franchise agreement. These include the following:

  • Documents relating to the site, i.e. the lease, sublease, licence etc.;
  • Equipment Hire Purchase Agreement;
  • Any agreement relating to the conditional use of any Intellectual Property;
  • Any agreement relating to security, such as a mortgage, indemnity, guarantee, security deposit or loan agreement;
  • A Confidentiality Agreement.
  • Any agreement to extend the term, i.e. continue operations for a specified period of time in a specific location.

All of these documents should be provided to the franchisee a minimum of two weeks before any franchise agreements are entered into. For clarification on which documents, long-form or otherwise, apply to your particular situation, speak with a franchise solicitor.

Leasing documents

As a franchisee, you should receive a copy of the lease agreement no more than one month after the lease has been entered into. If this doesn’t happen, contact a leasing lawyer or your franchise solicitor immediately.

In the same vein, if you have not entered into a lease but have already started occupying the premises, the landlord of the site must give you the following documents:

  • A copy of the lease no more than one month after you have started occupying the premises;
  • A copy of any documentation that grants you the right of occupation, no more than one more after the execution of the lease; and
  • A document detailing the terms and conditions for occupying the premises, no more than one month after you have begun occupying the premises.

Conclusion

As a franchisee, it is imperative that you have all the relevant documentation made available to you with the specified time frames typically indicated within the franchise agreement. For more guidance on what to expect in terms of documentation, contact LegalVision on 1300 544 755 and connect with an experienced online franchise solicitor today.

RSVP for our March 18 webinar: How to Franchise Your Business
If you own or operate a successful business and are looking for an avenue for rapid growth, franchising can be a great way to achieve that goal. LegalVision is hosting a free webinar to help business owners looking to expand into a franchise network. Register for free now.

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