In Short
- Franchisors in Australia must provide initial and ongoing training to franchisees, as outlined in the Franchise Agreement and Disclosure Document.
- Training helps franchisees maintain brand standards, comply with regulations, and succeed in their operations.
- The Franchising Code of Conduct requires clear documentation of training responsibilities, including costs and obligations, to ensure compliance.
Tips for Businesses
Clearly define your training obligations in legal documents like the Franchise Agreement and Disclosure Document. Invest in comprehensive training programs, including manuals and ongoing updates, to support franchisees’ success. Well-trained franchisees strengthen your brand, reduce risks, and adapt to industry changes, ensuring long-term growth for your franchise.
As a franchisor, you must ensure your franchisees have the tools and knowledge to run their businesses successfully and maintain your brand’s standards. In Australia, franchising operates under the Franchising Code of Conduct (the Code), which sets clear rules for franchisors. One key aspect is your obligation to train your franchisees, typically outlined in the Franchise Agreement and Disclosure Document. This article walks you through your potential training obligations as a franchisor in Australia. Training is not just about teaching franchisees the ropes. Instead, it is about investing in their long-term success and the strength of your overall business.
What Training Obligations Do You Have?
Franchisees rely on you to provide the guidance and knowledge needed to operate successfully under your brand. Training obligations are often detailed in two key legal documents:
- Franchise Agreement: This legally binding document between you and your franchisee outlines both parties’ rights and obligations. It also includes training requirements; and
- Disclosure Document: This document provides essential information about the franchise system. It also includes your training responsibilities and any costs they may incur to undertake training. This allows your prospective franchisees to make an informed decision.
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What Training is Typically Included?
1. Initial Training
As a franchisor, you should provide initial training to new franchisees. This step ensures they are fully equipped to run their franchise and adhere to your business and operational model.
Initial training typically covers:
- Business Operations: Introduce the franchisee to daily operations, covering customer service, staff management, inventory control, and marketing requirements. Train them on stock ordering and supplier interactions;
- Preferred Suppliers: Guide franchisees on approved suppliers to ensure consistent quality and pricing. Teach them how to engage with these vendors and adhere to purchasing guidelines;
- Franchise System Overview: Provide an overview of the franchise’s core values, business model, and legal obligations. Clarify financial commitments, including royalties and marketing fees; and
- Performance Expectations: Establish clear guidelines for meeting performance standards and KPIs. Train franchisees on tracking metrics and implementing improvement strategies to uphold brand reputation.
This initial training sets the foundation for the franchisee to operate their business in line with your brand and standards.
2. Ongoing Training
Ongoing training, while not always mandatory, is a common feature in franchise systems. As the franchisor, you may be required to offer continued support and training to ensure the franchisee stays updated with:
- evolving business practices;
- new products; or
- changing industry regulations.
You may wish to detail any ongoing training requirements in your Franchise Agreement and could cover:
- updates on new technologies, systems, or software;
- changes in regulatory requirements, particularly related to compliance with Australian law; and
- refresher courses to maintain or improve operational standards.
It is important to outline whether you will be offering ongoing training. You should also clarify what specific areas this will cover in your legal documents.
Who Bears the Costs of Training?
The responsibility for covering training costs is an important consideration for you and your franchisees. There are three primary ways this can be structured:
- Included in the Franchise Fee: The cost of initial training may be included in the upfront franchise fee, which the franchisee pays when they first sign the agreement;
- Separate Fees: Alternatively, training costs may be charged separately. For instance, while the initial training might be included in the franchise fee, additional or ongoing training could incur separate costs; and
- Franchisor Responsibility: In some cases, you, as the franchisor, may choose to absorb the costs of training, particularly for ongoing or mandatory programs.
The financial responsibility for training should be clearly outlined in the Franchise Agreement and Disclosure Document to avoid any disputes down the line.
Are There Other Forms of Training?
While initial and ongoing training are the most common, there are additional training opportunities you might consider incorporating into your franchise model.
3. Corporate Events and Conferences
Many franchisors in Australia host annual conferences, sales meetings, and strategy workshops. These gatherings are invaluable for franchisees. They offer insights into the franchise’s performance, share growth strategies, and foster connections with fellow franchise owners. For example, a conference could include keynote speakers sharing success stories or breakout sessions focused on marketing tactics. This would help franchisees learn and grow together.
4. Training Manuals and Resources
Provide franchisees with:
- comprehensive training manuals
- operational guides; and
- online resources.
These documents are essential for onboarding new staff or refreshing existing team members on procedures. By having these resources on hand, franchisees can easily:
- ensure consistency across locations;
- tackle operational challenges; and
- maintain high standards.
For instance, a well-structured manual can include step-by-step procedures for customer service or inventory management. This would make it easier for franchisees to deliver the best experience possible.
Providing your franchisees with training resources ensures they have a reference point to maintain consistency. This is particularly important when onboarding new employees or franchisees face unfamiliar operational challenges.
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While setting up and maintaining a training program requires time and investment, it is one of the most crucial aspects of a successful franchise operation. Well-trained franchisees are more likely to:
- run their businesses smoothly;
- reduce operational risks; and
- maintain the high standards your brand represents.
Here are four key benefits:
- Maintaining Consistency: Ensuring all franchisees are trained to operate under the same system safeguards the consistency of your brand across all locations;
- Minimising Legal Risks: Proper training can help franchisees comply with Australian legal requirements, reducing the risk of disputes;
- Increasing Franchisee Success: Franchisees receiving ongoing training and support are more likely to succeed, which benefits your brand through customer satisfaction and stronger franchisee relationships; and
- Adapting to Change: With markets, regulations, and technologies constantly evolving, ongoing training ensures your franchisees stay competitive and compliant.
Franchisee Training Obligations Under the Code
The Code requires franchisors to provide clear and accurate information about their training obligations in the Disclosure Document. It is critical to include:
- a description of any initial training provided to franchisees;
- details of any ongoing training who bears the costs; and
- a clear outline of the franchisor’s and franchisee’s obligations regarding participation in training.
Key Takeaways
As a franchisor, training is one of the most critical investments you can make in the long-term success of your franchisees and your overall brand. Whether offering initial onboarding or ongoing professional development, having a well-structured training program ensures your franchisees can:
- uphold your standards;
- comply with regulations; and
- contribute to your brand’s growth.
Ensure that your training obligations are clearly defined in your legal documents to avoid misunderstandings and maintain compliance with Australian franchising laws.
If you are unsure about how to structure your training plan, our experienced franchising lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Yes, as a franchisor, you are required to provide training to franchisees to ensure they can operate their businesses successfully while maintaining your brand’s standards. These obligations are typically outlined in the Franchise Agreement and Disclosure Document, as required under the Franchising Code of Conduct in Australia.
The cost of training can be structured in several ways. It may be included in the upfront franchise fee, charged separately for additional or ongoing training, or absorbed by you as the franchisor, particularly for mandatory or ongoing programs. The financial responsibility for training should be clearly outlined in the Franchise Agreement and Disclosure Document to avoid disputes.
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