Franchisors See Red On Black And White Detail

Sydney Morning Herald:

Changes governing the relationship between franchisor and franchisee may harm the industry, writes Julianne Dowling.

Some of the recent changes to the Franchise Code may be difficult to implement and lead to higher costs, say franchise law specialists who represent leading retail brand franchises.

They fear not only greater capacity for problems but more work for both franchisors and franchisees.

Mandatory inclusion of the starting date on contracts before signing may be difficult to implement in practice and leave franchisors liable for the initial upfront investments in fit-out and leasing deals, according to Michael Smith, whose legal firm, Smith Law, represents a number of well known retail and hospitality brands.

“I’m concerned laws are being passed, which are difficult to implement in practice,” Mr Smith said.

“The code says that a franchisee cannot be bound by a franchise agreement until the disclosure documentation, which includes this agreement, has been completed in all respects (including the start date).

The disclosure document must be issued to the franchisee 14 days before the agreement may be entered into. The franchisee then has a further cooling off period of seven days after signing. But, explained Mr Smith, in cases where premises are being fitted out, the startingdate is often only established just before trading begins.