Question: What is a Franchise Agreement Cooling-Off Period?Answer:
Buying a franchise is a significant decision that requires ongoing investment of your time and money. So what happens if you change your mind after signing a franchise agreement? The Franchising Code of Conduct gives you the right to terminate the contract within the franchise agreement cooling-off period.
The cooling-off period lasts for seven days from the earlier of the date you:
- signed the agreement; or
- made the first payment.
Use this period to ensure you have made the right decision and review the financial information provided by the franchisor.
If you terminate the agreement during this period, you can recover payments you have made under the agreement. The franchisor should provide these to you within 14 days of termination.
However, the franchisor does not have to refund any amount which is a “reasonable expense“. The franchise agreement will usually set out the types of expenses which are considered to be reasonable.
Note: It is usually better for you to take your time before deciding whether or not to enter the contract, rather than using the franchise agreement cooling-off period to have second thoughts and walk away.
This is because you will usually not recover all costs invested, particularly if the franchisor has provided you with training prior to termination.
Furthermore, if you signed a lease agreement at the same time as the franchise agreement, you may be financially liable for the lease if it has no cooling-off period.