Table of Contents
- Have You Made the Image and System Available?
- How is the Territory Important?
- What is the Importance of Promotional Materials?
- Are You Managing Your Products Effectively?
- Are You Providing Ongoing Support?
- Do You Keep in Touch With Your Franchisees?
- Do You Regularly Update Your Franchise Documents?
- Key Takeaways
Being a franchisor comes with a lot of responsibilities. If you are planning on establishing and running a franchise network, you will have a multitude of responsibilities. You will need to be across all of these before you start contacting prospective franchisees. This article will take you through some of the key responsibilities of franchisors in Australia.
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Have You Made the Image and System Available?
The image refers to the trade marks and other intellectual property of the franchise. Your franchisees will need access to this intellectual property to promote their products and store. This intellectual property is very important for you and the franchisees as it is what customers are familiar with and recognise when using your goods or services.
In most franchise relationships, it is the franchisor’s responsibility to promote and protect the image of the franchise and to monitor adherence to the use of the image within the franchise network. Importantly, you still own all this intellectual property. However, due to your franchisees becoming members of your franchise network, they will rely on this intellectual property to operate and grow their franchise business.
The system refers to the operations, procedures, rules and regulations of the franchise. When you franchise, you will give all the necessary materials to the franchisee so that they can abide by this system and replicate it in a new area.
How is the Territory Important?
The territory refers to the area within which a franchisee’s business will operate.
In some networks, franchisors provide an exclusive territory, while in others, they do not offer exclusivity. Whether or not you provide your franchisees with exclusive territory depends on several factors, including the:
- type of business; and
- business plan that you prepared for the franchise.
If you decide to provide non-exclusive territories, then you or another franchisee can open another franchise next door to a current franchisee. However, you should consider that this may be damaging to both franchisees and, as a result, to the franchise network overall. This would generate needless competition within the same franchise and may not serve either party in the long run. That is why it is important to think about the territories you are granting to the franchisees and to decide on your territories and model from the start of your franchise journey.
Continue reading this article below the formWhat is the Importance of Promotional Materials?
As the franchisor, you will need to make all the promotional materials accessible to your network of franchisees. This will cover things like flyers, entry forms, banners and giveaways, to name just a few.
This ensures that all franchisees are on the same page and are using the same promotional materials across the network. It is not only important for synergy amongst the franchisees, but it is equally important to the customers of the business.
Are You Managing Your Products Effectively?
As a franchisor, you will be responsible for tracking where and when supplies are sent. An efficient system of tracking the produce will guarantee wastage is kept to a minimum.
The standard of your products must be the same for every franchisee in your network.
In many ways, the reputation of the franchise depends on the consistency of your products at each franchise. One way to make sure that you are managing your products effectively is to make sure that all your franchisees use products that are provided by an approved supplier. This way, you will be able to control the quality of the products and manage them effectively.
Are You Providing Ongoing Support?
As the franchisor, you should provide ongoing support to your franchisees. This includes things like technical and operational advice when requested during normal business hours. In fact, part of this responsibility is to oversee the operations of the franchise network and to ensure there is compliance with the operational standards and procedures.
Having a carefully drafted operations manual and franchise agreement will set out the obligations and expectations of franchisees when operating your franchise and generally your obligations to support the franchise network.
Do You Keep in Touch With Your Franchisees?
One of the common reasons why disputes arise is due to lack of communication. It is always important to have a clear line of communication between you and your franchisees. If you neglect your franchisees or they feel unsupported, you are bound to miss important signals or end up with a disgruntled network of franchisees. For example, by regularly touching base with your franchisees, you might find that they are unhappy with a current supplier of goods required under your operations manual. By keeping in regular contact, you should be able to pick up on these issues from the franchisees and resolve them before they get out of hand.
Do You Regularly Update Your Franchise Documents?
In Australia, franchising is regulated by the Franchising Code of Conduct. In addition, there are many other laws that apply to the conduct of franchises, such as the Australian Consumer Law and the Fair Work Act.
Franchisors should regularly review their legal position and discuss changes in law with their lawyers. This includes regularly updating your franchise agreement and processes to align with laws. In addition, ensure you comply with your annual obligations under the Franchising Code of Conduct, which requires that by 31 October each year, you must (amongst other things):
- update your disclosure document;
- update your key facts sheet; and
- verify your solvency by providing financial statements and/or being audited.
Key Takeaways
There are many responsibilities that a franchisor must take on in their role as relationships manager of the network of franchisees. For starters, you as the franchisor, will need to give your franchisee the necessary intellectual property they require. This includes both the image and the system your franchisee will need to successfully run the individual franchise. Further, you will need to make sure that each franchisee is given an appropriate amount of territory to conduct their business. If their fellow franchisees are too close and are harming their profitability, your aggrieved franchisee will likely close and sell the individual franchise. You also need to give your franchisees the appropriate promotional materials so they can advertise their individual franchise.
Additionally, you need to make sure that your franchisees receive an adequate supply of the franchise’s products. You also need to make sure that the quality of goods you supply to your franchisees is identical across the board. Otherwise, your franchise’s brand reputation is likely to be damaged. Also, it is imperative you provide your franchisees with ongoing support and keep in contact with them. Lastly, you should periodically review your franchise documents to ensure they reflect the latest legal developments.
If you have any questions about your responsibilities as a franchisor, contact our experienced franchise lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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