Reading time: 3 minutes

The pre-contractual stage of entering into a franchise agreement is incredibly important for any franchisor. The Franchising Code of Conduct has strict rules that need to be complied with, particularly when it comes to representations. This means that a franchisor cannot simply say anything they would like to convince a potential franchisee to sign a franchise agreement. This article will run through the key points you need to consider when communicating and negotiating with a potential franchisee.

Act in Good Faith

The franchisor has an obligation to act in good faith. Acting in good faith means:

  • To be honest;
  • To take other party’s interests into consideration; and
  • To act in good conscience.  

By keeping this concept of good faith in mind throughout the negotiation stage, you will not only be complying with the Franchising Code of Conduct, but you will also ensure that you do not give false representations.

False Representations

The Franchising Code of Conduct prevents you as a franchisor from waiving any verbal or written statements made during negotiations. In practice, this means any clauses relating to representations, warranties or an entire agreement may be void. As a franchisor  you need to be wary of any statements you make regarding:

  • Sales estimates;
  • Financial forecasts;
  • The level of assistance you can provide to a franchisee;
  • The amount of upfront costs required;
  • The right to terminate the agreement;
  • The operation of the franchise territory or marketing area; and
  • The general operation of the franchise system.

It may also be worthwhile for a franchisor to review any marketing materials or information packages provided to a franchisee to make sure all statements are true and correct.  An important tip is not to overemphasise or promise anything that you cannot fulfill.

What are the Consequences of Not Complying with the Franchising Code of Conduct?

If the franchisor fails to comply with the Franchising Code of Conduct, this could cause issues if disputes in the franchise arise between you and the franchisee. One common cause of action that a franchisee tends to rely on is misrepresentation and misleading and deceptive conduct. Misrepresentation refers to a false representation, whereas misleading or deceptive conduct refers to the franchisor’s general conduct. It needs to be proven that the statement and/or conduct had led the franchisee to enter into the agreement.


By following the above best practice tips on your pre-contractual negotiations, you will be more protected from any future claims.

Questions about your franchise agreement of the Franchising Code of Conduct? Let out Franchise Lawyers know on 1300 544 755. 


Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards