Today in our Franchise Lawyer Special series, information about fitting out your franchise business premises. One of your first tasks after purchasing a franchise might involve fitting out the premises where your business will operate. Franchisees usually prefer this process to take place as quickly as possible with minimal complications so that the business can start making money. If there is no shop front or fixed premises where you will operate the business then there will most likely be no fit out requirements.

Where fit out is required, generally the franchisee will take responsibility for fitting out the franchise premises at his/her own expense. Fit out can usually commence as soon as you are given occupancy rights under the lease for the premises.

What if I don’t fit out the premises in time?

As with all construction related projects, the fit out can take longer than expected. This will invariably delay the opening of your shop or commencement of your business. In these circumstances it would help greatly if the franchisor was open to extending the commencement date under the franchise. The franchisor will usually act reasonably, provided the delays were due to circumstances outside your control. You could also consider requesting wording in the franchise agreement to cover this situation to give you some certainty.

You should always use best efforts to complete the fit out of the premises by the due date. If it is found that you have unreasonably delayed the fit out process then you could be deemed to have breached the franchise agreement. It is important that the franchise agreement provides for reasonably achievable time frames to fit out the premises. It is always prudent to also keep the franchisor updated on any progress or delays as they happen.

What if the brand or business concept changes?

It is common for a brand to change its image or its business concept during the term of your franchise. The franchisor may want to redesign the business logos so that they are more appealing to customers. In such circumstances, the franchisees may have to refit or refurbish their premises/vehicles to bring them in line with the new brand or business concept.

In most cases, if a refit or refurbishment is required within the first year of the franchise then the franchisor will be responsible for any costs and expenses. If the refurbishment is required more than 1 year after the franchise business commences then you as the franchisee will most likely have to pay the associated costs.

The above general rule does not apply if a refit or refurbishment is required due to damage to the premises/vehicle. In this case the franchisee will generally be responsible for the repairs or refit.

Conclusion

Most franchise agreements will outline who has responsibility for fitting out the premises, including deadlines and the rights and obligations of parties. It is important you fully understand your fit out obligations as they can often be quite onerous financially.  For this reason, it is recommended you obtain legal advice from a franchise lawyer to assist you with understanding your obligations.

Felix McKnight

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