Franchising

Richard Ottley
Partner
Employment and workplace relations, Franchising, Commercial

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Overview

If you're considering franchising your business, you need advice from an experienced franchising lawyer who understands the unique characteristics of franchise businesses and the challenges that franchisors face.

Our commitment to plain English

We are committed to drafting franchise documents which are in plain English and easy to understand. We know that the franchise documents which form the basis of your system need to be capable of providing the level of protection which you need as a franchisor, but also need to be fair to all parties and to guarantee franchisees an appropriate level of training, mentoring and support.

Protecting your intellectual property

A key aspect of our work with franchisors is protecting the intellectual property associated with the franchise. This includes safeguarding confidential information, securing domain names and determining what trade marks are to be used. The classes in which trade marks are to be registered also need to take into account the possibilities for diversification of the business in the future.

Our work for franchisees

For franchisees, we are able to review franchise agreements and supporting documentation for a fixed fee which can be agreed in advance. We have the experience not to recommend extensive amendments which we know will be unacceptable to the franchisor, but to focus instead on those aspects which may be open to negotiation. We are also able to sign certificates of independent advice as recommended under the Franchising Code of Conduct.

In franchising, everyone can win

Because we work in franchising, we have valuable contacts within the industry who can advise you on financial modelling and on the different ways that your franchise system can be structured. We harness our experience and our professional networks to benefit you because we see ourselves as champions of the franchising industry. For franchisors, it is an effective way to expand an existing successful business and raise funds for future growth. For franchisees, it provides an excellent structure for running a business in a tried and tested way and benefiting from the experience and support of the franchisor.

Expertise

Establishment of national franchise networks
Drafting franchise agreements, disclosure documents and ancillary franchise documentation
Supply agreements
Establishment of national franchising advisory councils
Business structures
Protection of intellectual property
Information technology agreements
Compliance with the Franchising Code of Conduct
Advising on obligations under the franchise agreement and collateral documents
Lease of premises
Loan documents
Legal assistance with selling a business and assigning the franchise
Franchising litigation
Employment contracts
Contractor arrangements
Signed certificates of independent advice for franchisees
Detailed notifications to the ACCC in relation to full line and third line forcing conduct

Experience

Beauty salons: from distributors to franchisees

We were instrumental in rolling out one of the first national franchising systems for beauty salons in Australia. The challenge was to create a franchise network around an existing distribution network consisting of a large number of businesses which ranged very widely in their size, operational style and level of profitability.

Stay or go?

These businesses had the choice of remaining as distributors, becoming franchisees or leaving the network. From the franchisor's point of view, it was desirable to retain as many of the existing distributors within the national franchise network as possible.

Running contrary to this was the instinctive reluctance of individual business owners to forsake their autonomy and comply with full line and third line forcing requirements, along with all the other changes necessary to create the operational uniformity needed in any franchise system.

Careful negotiation achieves results

Our work involved creating a robust template for the franchise, defusing a range of potential disputes and making a number of representations to the ACCC to seek approval for the proposed system.

Through careful and measured negotiation, the franchisor was able to persuade the majority of business owners to trust in the leadership of the company, remain loyal to the brand and join the new franchise network.

Introducing flexibility and reducing the compliance burden

One of our clients wanted to create a franchise system for a service industry which used mobile units to perform its work. The challenge for this client was to attract two different levels of investment - a standard one for operator franchisees and a significantly higher one for area managers who would enjoy returns from the performance of the operator franchisees in their group.

Flexibility in the restraint provision

We tailored the franchise template to make the system as attractive as possible to the area managers who were the major investors and who would ultimately be responsible for the success of the venture. One feature of the template was a flexibility in the restraint provision, which was important for a business using mobile units. We ensured that the geographic area covered by the restraint was capable of being moved if the franchisee relocated its operating base.

Less compliance work means lower costs

Another key component was ensuring that there was no separate disclosure obligation on the area managers to the operator franchisees, which reduced the annual compliance burden and ongoing legal costs for both the area managers and the operator franchisees.

Expansion from a solid base

After setting up a successful franchise system in Australia, we helped the client expand operations to New Zealand by modifying the template to accommodate New Zealand law. We then provided ongoing support until the client's business expanded enough to allow the company to employ its own in-house lawyer.

Swaab Attorneys