Franchisors can choose how much support they want to provide franchisees in their network. The law does not prescribe a particular level, however, it’s important to remember that your success depends on their success. We set out some principles below to help guide you as to what type of support you should offer.

Franchise Agreement

Your franchise agreement may outline an agreed level of support, for instance:

  • training;
  • availability to respond to queries from franchisees for a specified period; and
  • when you are obliged to provide updated training after a franchisee establishes its business.

When setting up a franchise, it’s valuable to speak with your lawyer about the level of support you would like to provide. In some cases, it’s an advantage to draft the relevant clauses broadly. Doing so allows you to retain a level of discretion and adjust the level of support you provide as the network evolves and circumstances change. For instance, if your network expands rapidly, you may find you don’t have the resources to provide the broad support you promised at the outset.

System and Marketing Plan

Providing your franchisees with a marketing plan or system that includes the right to use your intellectual property is central to a franchise. It’s then important to consider the level of assistance you will provide when setting up and operating your franchise network. For instance, many franchisors require franchisees to submit advertising for pre-approval. However, regardless of the level of support you provide, you are obligated to comply with the express terms of your agreement.

Good Faith

In deciding how much support to provide to your franchisees, you should always act in good faith. The Franchising Code of Conduct (Code) imposes this obligation on both you and your franchisees. You should act honestly and cooperate with your franchisees to achieve the purpose of your franchise agreement. The obligation extends to all aspects of your relationship and applies before, during and after entering into the contract. Although there is no prescribed formula, you are likely to be seen as acting in good faith if you:

  1. consider issues and requests for assistance that your franchisees raise;
  2. make decisions relating to your franchisees within a reasonable period;
  3. take into account the franchisee’s legitimate business interests in developing support systems; or
  4. provide a ‘reasonable’ level of support.

Employment Law

Providing support and training around a franchisee’s employment law obligations is an important risk management strategy for you as a franchisor. Under the Fair Work Act 2009 (Cth), you may also be responsible if you contributed to your franchisee’s breaches of Australia’s employment laws. Providing proper training and implementing processes to monitor the compliance of franchisees are valuable strategies for minimising this risk. It would be worthwhile to consider the following strategies:

  1. providing employment law training to your franchisees (such as at your annual conference);
  2. distributing updates on relevant changes to employment laws in newsletters;
  3. circulating copies of the Fair Work Handbook;
  4. recommending or requiring franchisees to use software for calculating award rates and entitlements under the Fair Work Act; and
  5. having a dedicated point of contact within the franchisor company for employment-related queries.

Key Takeaways

When setting up a franchise network, ensure you keep these principles in mind when deciding how much support to provide your franchisees. Once you explicitly state this level of support in your franchise agreement, you must uphold your obligations to the franchisee. If you have any questions or need assistance developing the proper systems to support your network, get in touch with our specialist franchise lawyers on 1300 544 755.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
Amritha Thiyagarajan

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