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What are my rights as a franchisee?

The exact terms of your tenure as a franchisee will be laid out in a contract, but there are several regulatory requirements that apply to all franchises.

The Franchising Code of Conduct, introduced in 1998, set out some of the most stringent franchise rules in the world.

The code requires mandatory dispute resolution to help solve disagreements. It allows for a cooling off period, requires the franchisor to provide independent evidence of solvency each year and demands that franchisors explain their intentions whether to continue or end a contract six months before the contract’s expiry.

You can see details on the code here - http://www.franchise.org.au/lib/pdf/media/articles/2010/july/code_of_conduct_updated_july_2010.pdf

Beyond this, however, you must make sure that you fully understand and agree with everything in your initial contract. Get a lawyer to look over the contract for you and advise you on its contents.

“You have to go through the franchisee agreement in detail and get a lawyer to do so too,” says Steve Wright, executive director of the Franchise Council of Australia. “Not to do so is craziness but a lot of people think they don’t need to do it.”

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Comments (1)

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Some quick web research will indicate that the Franchising Code of Conduct is deficient. Still, it is a must for franchisees to read it and it is critical for a prospective franchisee to read the contract and have an experienced franchising lawyer review it.

As a franchisee you have very few rights while the franchisor is given the power to protect the brand. That is enormous and when abused it can lead to a financial disaster. However, thorough due diligence is beyond the scope of virtually all franchisees. You will not recognise red flags so get experienced help and do not rely on the franchisor for that assistance.

Ray Borradale , January 19, 2012