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FRANCHISING FOR THE FRANCHISOR IN MELBOURNE

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Franchising for the Franchisor

“The success of your business is our business success…”
(Francis Ruggiero, Behan Legal, Managing Director 2005)
 

Establishing and testing a business concept is not as easy as some would believe. Statistics show that the average stand-alone small business has an 80% chance of failure in its first five years of operation. [1] Therefore, one must carefully plan the franchise of a business.

Before franchising, it is advisable that a small business should operate for at least three years to prove that it has a viable concept, ongoing market demand, replicable systems, and a management, logistic, marketing and training structure capable of supporting franchisees in a variety of locations.

One must demonstrate that the business is successful, distinctive, and replicable before franchising is possible.  

BUSINESS & CORPORATE AUDIT

It is necessary to conduct a commercial audit of the business, including verification of the business and company structure, the adequacy of intellectual property and trademark protection. Behan Legal then reviews existing written operating procedures and accounting practices.

The audit ensures that the existing business is in league with the strictest commercial legal compliance and operates as an efficient model, which is franchisable. Behan Legal prepares a report detailing the results of the audit with recommendations. Working together with you, the firm creates a viable 3-year expansion plan for the business to bring it in league with the model of franchise you wish to create.  

ASSET PROTECTION

Running a business involves numerous risks, and in addition to helping, your business grows; Behan Legal prepares for all contingencies with its asset protection services conducted by consultants and legal advisers with broad experience and expertise in this area.

With proper reviews, potential business owners can avoid difficulties, problems, and pitfalls. It is critical to asset protection that there are regular reviews of business structures, which protects both business and personal assets; as ultimately good reviews will give benefits of saving money and avoiding adversely high-risk situations

Behan Legal has conducted numerous comprehensive asset protection reviews for large-scale companies that have ensured their success and viability.  

MODEL & TRIAL

Once your business is running in accordance to the model you wish to franchise, Behan Legal’s consultants will help you decide what your franchise system will be called and what support systems will be provided for franchisees. The firm will help you decide on an initial franchise fee and an ongoing management fee structure.

Behan Legal ensures that your trialled and successful operating business is in place and that all documents are ready before you meet with the first potential franchisees. The firm then works with you to create a solid contract and an operations manual setting out the rules and regulations of the franchise. The firm will time the franchise launch and develop a business expansion plan for your business for at least the next three years.

The Franchise Contract

Disclosure Statement

The Franchising Code of Conduct  [2]  (‘Franchising Code’) requires a franchisor to create and maintain a franchise disclosure document. Its purpose is to give prospective franchisees enough information to enable them to make a reasonably informed decision about the franchise. [3]

Behan Legal prepares the disclosure document in conjunction with you, and other consultants that are relevant to the business, that not only complies with the Franchising Code, and presents the key strengths of your franchise to potential purchasers.

Franchise Agreement

This document forms the legally binding contract between the franchisor and the franchisee, by which the franchisor grants to the franchisee the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor. [4]

It is imperative that this important document includes all the protections necessary for your franchise business to be operable, such as:

  • Cooling off period

  • Trademark

  • Initial capital investment fee

  • Payment for goods and services

  • Royalty or franchise service fee

  • Training fees

  • Copy of lease

  • Marketing and other cooperative funds

  • Disclosure of materially relevant facts

  • Transfer of the franchise

  • Termination of agreement

  • Dispute resolution process
     

PROPERTY & LEASES

Often when you franchise a business, there will be property and lease issues. Where possible, it is advisable that you plan adequately for the timing of the franchise to be concurrent with the lease of the property, to ensure a smooth transition. Sometimes the franchise business may involve a purchase of property. Behan Legal has good experience in commercial property law; and will ensure that you have the best possible protection in this area of your franchise.  

OPERATIONS MANUAL

The Operations Manual is the exclusive property of the franchisor, and therefore it is important that it has intellectual property protection. This manual forms the backbone of your franchise operation, and often business success depends on the policies and procedures formulated in the manual for the running of your franchise.

The manual must be comprehensive and complete in every area, while also remaining dynamic with the potential for envisioning a myriad of circumstances and conditions. Rather than being a set of general guidelines, it should include detailed directions on all matters of running your franchise business.

This will ensure continuity and consistency in the level of goods and services provided by your franchise operation. Behan Legal’s Managing Director, Francis Ruggiero has substantial experience in creating policy and procedure manuals, including creating the guidelines for Victoria’s first Best Practice law firm and our team will work to help ensure that you have an operable best practice system in place.  

CONFIDENTIALITY DEEDS

When providing the franchisee with sensitive information, which enables them to assess whether to enter the franchise agreement, it is necessary to protect the confidentiality of the franchisor. Therefore, the proposed franchisee must enter a deed of confidentiality to prevent the disclosure of any business and trade secrets.  

EMPLOYMENT CONTRACTS

The employees of the franchise are important assets. They shape and determine the reputation of your business, and often poor staff performance means that the good name and credibility of your franchise suffers. Therefore, it is imperative that you choose the right staff, and adopt employment contracts that reflect the full scope of their duties and responsibilities.

Employment contracts should not be generic for all members of your franchise, but rather reflect the roles of different staff. Moreover, you must have policies and regulations in place that ensure your staff act in accordance to the highest levels of professionalism for your individual franchise. Behan Legal will work together with you to create employment contracts and manuals that reflect your company’s core values and protect your business interests.  

THE END OF THE BEGINNING

Finally, as the success of your business is our business success, Behan Legal provides ongoing continual business consulting and legal support for your franchise to ensure this success. The firm will help you modify agreements and documents as your business changes, and provide dispute resolution and mediation services.

Behan Legal keeps abreast of all the developments in the franchising industry through a group of international and local affiliations, and most importantly of all, it keeps abreast of your business by collaborating with you to ensure its continuity and success.

NEED MORE INFORMATION

Behan Legal advises and assists on these important issues, however, given the complexity will meet you personally to evaluate your position. For an appointment, call 03 9646 0344 .

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[1]  Australian Bureau of Statistics, Small Business Sector, 2001

[2]  Trade Practices (Industry Codes - Franchising) Regulations 1998, Division 2, Section 6

[3]  Ibid, s. 6A.

[4]  Ibid, s 4(1) (b)

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