When contemplating the world of franchising, iconic images often come to mind. The mighty golden arches. The place where burgers taste better. The unforgettable 9481 11 11. What ties these icons together? They represent the remarkable success stories of fast food franchises. For fast food business owners considering the leap into franchising, there’s a wealth of knowledge and essential steps to navigate before embarking on franchisee recruitment. This article explores crucial legal considerations and steps to pave the way for successful fast-food franchising.

Intellectual Property Considerations

All of those iconic things we mentioned at the start of this article have another thing in common; they are all examples of intellectual property (IP). IP incorporates your name, your logo, your copyright (which includes such things as menus and recipes) and your trade marks. IP even sometimes includes your get-up and colour scheme. Having catchy and legally protected intellectual property is absolutely essential for a successful fast food franchise. Here, you should be considering: 

1. What to protect via trade mark registration – this will include your logo, key slogans, and your name; 
2. Where those marks should be registered – McDonalds no doubt has numerous trademarks registered right round the world. Typically, a mark will be registered when a brand starts seriously thinking of moving into a particular market. If you think international expansion could be on the cards (and, heck, we all want to believe in global domination, right!) you should look to register in your target markets early; 
3. Whether there are any trade secrets that need extra protection – legend has it that the precise recipe for the 11 secret herbs and spices is kept in a vault in Kentucky and the fast food chain has two different factories making only part of its formula, so no one entity knows the entire secret recipe.  While this is a pretty extreme example, if you have a secret sauce or spice mix iconic to your brand, there are some more simple measures you can implement to maintain its confidentiality. A simple example is requiring non-disclosure agreements to be signed by manufacturers. You could also characterise the recipe as a trade secret in all relevant documentation, and ensure it was only provided to team members on a ‘need to know’ basis.  

The importance of an operations manual in fast food franchises 

Consistency is key for a successful fast food franchise. You want to ensure every item is the same across every outlet. The best way to achieve that is setting out precisely what has to be done in a detailed operations manual. For example, exact ingredients, recipes, and packaging instructions will all be contained in an operations manual. But the operations manual has a lot more in it than just recipes. In preparing an operations manual, the following are important inclusions: 

1. information to promote consistency across other aspects of the business, including customer service, promotion, and store layout; 
2. policies and procedures, including food storage and handling; and
3. employment law information, including as to the Fast Food Industry Award, and other minimum employment requirements. 

Food health and safety laws

As touched on above, this is an important consideration for all fast food chains. One can imagine the negative publicity that would flow from a gastro outbreak originating in one of your outlets! No doubt you are somewhat across the Australia New Zealand Food Standards Code already through operating your business, but it’s important you also ensure your franchisees are aware of their obligations, including through initial training and provision of appropriate resources. 

But there are other laws to consider too. Some of these vary across states. For example, if your business transports meat from a processing facility to your retail outlet in NSW, a licence first needs to be obtained from NSW Food Authority. 

Leasing vs Licencing the Fast Food Franchise Premises

A lot of franchisors initially intend to require their franchisees to hold the relevant retail leases. While this makes sense from a liability mitigation perspective, it’s not always the best or most realistic approach. If you intend to have outlets in major shopping centres, for example, it’s likely the lessor will require the franchisor to hold the lease. While this exposes you to some risks if the franchisee fails to adhere to the lease terms, it does have some benefits. Those benefits including being able to take over occupation in the event of termination. When the franchisor holds the leases, they can also negotiate consistent lease terms to apply with that specific lessor. 

If the franchisor holds the lease, an appropriate licence agreement will need to be put in place. A licence will entitle the franchisee to occupy the premises. Further certain terms need to be incorporated into the lease itself. Those terms will allow you to franchise. 

Our article here provides some further, more general information about preparing to franchise. 

If you’ve read all the articles and done all the due diligence and think now is the right time to franchise, we would love to help. Magnolia Legal offers fixed fee pricing for a franchise set-up. Alternatively, we can include this in our Magnolia Monthly product – please get in touch to see what works best for you!