What Are the Key Franchisee Obligations?

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Table of Contents

• Payment of Fees and Royalties
• Compliance with Systems, Standards and Brand Image
• Participating in Training 
• Meeting the Minimum Performance Criteria
• Intellectual Property
• Confidential Information
• Key Takeaways

The franchisor gives you the Franchise Agreement, Disclosure Document, Key Facts Sheet, and the Franchising Code of Conduct (the Code) to explain your obligations. While these documents may differ depending on the franchise, most franchises have some essential obligations based on the Code and industry standards. This article will outline the critical franchisee obligations you need to follow in your business.

Payment of Fees and Royalties

You, as a franchisee, must make several payments to the franchisor and other third parties (like suppliers). These payments include one-time fees, like the Initial Franchise Fee, as well as ongoing fees, such as royalties and marketing contributions.

Compliance with Systems, Standards and Brand Image

As a franchisee, you must follow the below, which are set by the franchisor:

• standards;
• procedures; and 
• systems. 

This means following the Operations Manual, which holds crucial details about:

• necessary equipment;
• offered services; and 
• running the franchise. 

It also involves keeping equipment up-to-date and refreshing business premises as the brand evolves. Adhering to these systems maintains the franchise’s integrity and ensures you fulfil your obligations under the franchise agreement.

Participating in Training 

As a franchisee, you will often need to attend training sessions organised by the franchisor. These sessions will help you grasp different aspects of running your franchise smoothly, such as:

• delivering products or services;
• handling customer interactions; and 
• managing your business effectively. 

Furthermore, you will be encouraged to engage in system updates or improvements to keep up with the franchisor’s evolving business model.

Meeting the Minimum Performance Criteria

In your franchise agreements, you are typically responsible for meeting minimum performance criteria. These criteria vary depending on your franchise but serve as benchmarks set by the franchisor to ensure your franchise operates at the same level as the brand’s standards. Meeting these performance metrics is crucial for maintaining the overall integrity and reputation of your franchise system.

Intellectual Property

You have a crucial responsibility not to misuse the intellectual property (IP) associated with the franchise system. You must use the IP according to the franchisor’s guidelines to maintain brand consistency and uphold the established image in the market. This involves following specific branding and marketing standards, using approved materials, and avoiding any unauthorized modifications to the intellectual property. Ensuring correct usage helps the brand remain recognizable and retain its value.

Confidential Information

As a franchisee, you have access to confidential information from the franchisor. This encompasses details about how the franchise network operates, the franchisor’s financial standing, their training methods, trade secrets, and more. The franchisor must ensure that you maintain and keep this information confidential not only during the franchise term but also afterwards.

Negotiating Franchise Agreements Factsheet

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Key Takeaways

Franchisees must make various payments as outlined in the Franchise Agreement. Timely payment is crucial, and disputes often arise concerning these financial obligations, making financial management an essential aspect of your responsibilities.

You must adhere to established: standards, procedures, and systems outlined by the franchisor, as specified in the Operations Manual.

Various financial, operational, and performance-related aspects of your ongoing obligations highlight the importance of adhering to standards, meeting financial commitments, and contributing to the overall success of the franchise network.

If you have any questions about your franchisee obligations, our experienced franchise lawyers can assist 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.