The Franchise Agreement, Disclosure Document and the Franchising Code of Conduct all work together to outline your ongoing franchisee obligations. Although these documents will vary depending on your franchise, there are a few ongoing obligations that are common among many franchises.

Maintaining Appearances and Standards

The requirements of a business often evolve and so to can the outer appearance or standards needed to keep the franchise competitive and up to date. The franchisor may require the franchisee to update the equipment that is in place or even renovate or update the furnishings, fixtures or decor of the franchise.

Intellectual Property

As the franchise comes with valuable intellectual property (IP), the Franchise Agreement often licenses the use of this IP provided that the franchisee abides by certain terms and conditions. This often requires that the franchisee does not use the IP in a way that may affect the goodwill or uniformity and quality of the franchise. The standards that need to be maintained may be outlined in the franchise manual, which is received usually during the initial training period.

Maintenance of Information Systems

No matter what sort of franchise you are operating, there is usually a set of systems in place that is used across the board to maintain the business. The franchisor would usually require you to put these systems in place and maintain them in order for the business to operate smoothly. This may include things like the point of sale system, software, customer relationship management systems. As information systems often require licences, franchisees are obliged to maintain licences and upgrade products as necessary.

Confidential Information

As a franchisee, you are privvy to confidential information of the franchisor. This may include details of how they operate, their financial standing or the training manuals that they provide to you. Franchisees usually have an obligation to keep this information confidential, except for purposes that may be needed in operating the business. This may include, for example, the training of new employees.

Financial Review

The franchisor can request for a franchisee to provide details of their current financial and trading position. This may include the need for financial statements on a regular basis or the synchronisation of their financial status with the franchisor’s central system.

Payment of fees

Of course, the franchisee is expected to maintain their payment of fees to the franchisor. However, there are added considerations, for example, the need to pay the rent of the commercial lease or to maintain all other business obligations such as GST or the payment of superannuation and insurance. There are often clauses in the Franchise Agreement that refer to the maintenance of your business.

Conclusion

The above outlines the general requirements of a franchisee and their ongoing franchisee obligations. They largely involve the maintenance of standards in order to protect the franchise and maintain its system and good name. To get a detailed overview of your franchisee obligations, speak to one of our franchise lawyers who can review all of your franchise legal documents so you are aware of the standards you need to abide by!

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
Lachlan McKnight

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