With the explosion of franchised businesses in Australia, mobile franchises, such as car detailing, dog washing and lawn mowing businesses are gaining popularity.

However, there are some unique issues to consider when considering the purchase of a mobile franchise business, such as:

Territorial Exclusivity

One of the most important concerns when entering a mobile franchise business is the territory in which the business will be run and how you will go about obtaining and retaining customers.

These issues are addressed in different ways by different franchise systems. Some franchisors will provide details on the exact parameters of the territory in the franchise agreement (such as geographical boundaries of postcodes).  However, a franchisee in an adjoining territory or suburb may overlap your area.

These issues should be raised by the prospective franchisee with the franchisor before they commit to the franchise relationship. It is important to obtain independent legal advice and discuss these issues with your franchise solicitor to work on procedures that will enable you and the franchisor to resolve any potential conflicts that may arise.  After all, a franchise depends on both the franchisor and franchisee being successful to work.

Equipment and Transport

A key element of a mobile franchise is transport.  In most cases, a good quality vehicle of a certain type is required.  Additionally, a business logo or banner  is usually printed on the side of the vehicle as a requirement of the franchise agreement.

New vehicles and fresh signage is an important factor for any franchise, as it makes the business appear more legitimate in the eyes of the public. Unfortunately, these maintenance fees usually fall upon the franchisees. For this reason, the overall expected costs should be clearly communicated in the franchise agreement. Make sure your franchise solicitor informs you of these requirements and makes sure that they are reasonable.

Liability

Due to the nature of mobile franchises – namely that they are typically owned and run by one person – there are many concerns relating to liability, insurance and the general risk of personal injury whilst at work. If you are injured, it may mean that the business can no longer operate. As such, franchisees need to obtain insurance advice from an insurer to ensure the cover that will normally be required under the franchise agreement is sufficient to cover any situation. Insurance should cover the franchisee and the franchisee’s vehicle and property.

Workers Compensation for Employees

While many mobile franchise businesses are run by a franchisee working solely, others will allow for the franchisee to take on employees to handle additional demand.

In general, if a franchisor requires a territory (and the vehicle) to be run by its franchisee, the franchisor may adjust the size of the territory to maximize the profitability of the franchise. If you’re considering purchasing a mobile franchise business, ask your franchise lawyer to inspect the franchise agreement and check the terms and conditions for sufficiently flexible provisions relating to extra staff and extra vehicles. Some franchisors will also reserve the right to divide the territory into a smaller region if the franchisee is unable to service the demand in the area.

Licences

It goes without saying that the owner of the mobile franchise business should be licensed to drive a vehicle and maintain that licence, as without the ability to drive, the business cannot be operated.  Other licences should also be considered, such as industry specific licences such as plumbing or electrical licences if the business is trade based.

Conclusion

Given the amount of financial investment required for a mobile franchise business, it is extremely important for these issues to be discussed and negotiated at every stage of the negotiation process prior to entering into the franchise agreement. Have your franchise solicitor investigate the franchise agreement on your behalf to assess whether there are protocols to address these issues.

To get a fixed-fee quote for legal advice on franchising, contact LegalVision on 1300 544 755.

Emma Heuston

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