Franchise Agreement Reviews

A franchise agreement is a binding contract between a Franchisor and a Franchisee. It is typically a lengthy document that will detail the obligations of both parties, the security offered by the Franchisee, the duration of the agreement and much, much more. This article details the franchise review process, and what a franchise lawyer will look for in reviewing a franchise agreement. 


How does a franchise lawyer review a franchise agreement?


A franchise lawyer reviews a franchise agreement by thoroughly reading the document. During this process, they will either annotate the document with advice or draft a separate written advice. Crucially, a franchise lawyer doesn’t assess the document in isolation; instead, they cross-reference it with the franchise disclosure document and relevant laws. Of utmost importance, when scrutinising the franchise agreement, a franchise lawyer ensures it complies with the Franchising Code. 


What does a franchise lawyer look for in reviewing a franchise agreement?


When reviewing a franchise agreement, a franchise lawyer actively seeks out specific elements. These include:

  1. Identifying any ambiguous clauses – these are clauses that could be interpreted in different ways or where the meaning is unclear. Ambiguous terms in contracts can lead to confusion and disputes. Your franchise lawyer will pinpoint any clauses requiring clarification or amendment.
  2. Assessing clauses that impose obligations on the franchisee – engaging a franchise lawyer aims to provide clarity on your legal responsibilities, which are highlighted during the franchise agreement advice process.
  3. Evaluating the appropriateness of security provisions – nearly all franchise agreements include security measures such as personal guarantees, PPSA registrations, and sometimes security interests protected by caveat. A franchise lawyer considers the suitability of these provisions and may recommend seeking amendments to safeguard the interests of the franchisee parties.
  4. Identifying any red flags – certain provisions in franchise agreements may be unfair or expose the franchisee to significant risk. A franchise lawyer offers advice on such clauses and suggests necessary amendments.
  5. Ensuring compliance with laws – if a provision in the agreement contradicts applicable laws, it could become null and void. Resolving such issues may involve legal arguments, however, and it’s best to have a legally compliant agreement from the outset. If a clause conflicts with the law, it’s crucial to address it before signing the agreement and make appropriate amendments. Your franchise lawyer will assist you throughout this process.

What documents does a franchise lawyer examine?


In addition to scrutinising the franchise agreement, a franchise lawyer thoroughly examines the disclosure document, the key facts sheet, and any deed of prior representations. These documents are often collectively referred to as the franchise suite of documents, explained in our article here. Furthermore, they may need to examine other pertinent documents, such as financial disclosures provided by the franchisor, or brochures and advertising materials distributed by the franchisor.


How do I ask questions about the franchise agreement?


Engaging a franchise lawyer does not replace the necessity of thoroughly reviewing the franchise agreement yourself. While doing so, it is imperative to take note of any clauses that are unclear, require further examination, or appear inconsistent with your understanding of the proposed deal. It is advisable to raise these questions with your franchise lawyer promptly after their engagement, enabling them to incorporate your concerns into their analysis. When compiling queries for your franchise lawyer, it is beneficial to refer to specific clauses. For instance, you might ask for clarification on clause 10, or request a breakdown of clause 11. Putting your questions in writing provides your franchise lawyer with a clear reference point for their review of the franchise agreement.


Do I need a lawyer to review a franchise agreement? 


In Australia, franchisees are not legally obligated to seek legal counsel regarding the terms of the proposed franchise agreement. However, some franchisors may insist on it. Nonetheless, it’s always a good idea to get legal advice, regardless of any such requirement. A franchise lawyer has lots of experience in reviewing franchise agreements and can spot anything unusual or unfair. They can advise you on appropriate negotiation points, which can prevent you from signing a contract that contains undesirable provisions.  Moreover, they understand the laws that apply to franchise agreements, ensuring the agreement is drafted in a legally sound way.


Magnolia Legal are very experienced in reviewing franchise agreements, and offer fixed-price franchise reviews (see here). Get in contact for an obligation-free initial chat to see how we may assist you in reviewing a franchise agreement. 


Key Takeaways


  1. There is no legal requirement to have a franchise agreement reviewed by a franchise lawyer, but it’s a good idea and could save you in the long run; 
  2. Even if you engage a franchise lawyer, you should read the franchise agreement in full. Use your lawyers engagement as an opportunity to have any questions answered; 
  3. There are many laws that apply to franchise agreements, most importantly the Franchising Code. A franchise lawyer will be mindful of those laws in reviewing the franchise agreement.

Disclaimer: This article contains general information only and does not constitute legal advice. Magnolia Legal disclaims any liability arising from reliance on this article. Our terms of use apply