It is important for a franchisee to get professional advice before entering into a franchise agreement because it is a significant decision and financial commitment, and because franchisees need to understand their legal and financial rights and obligations under the agreement. Examples of things that a franchisee should know before entering into a franchise agreement are:

• whether the franchisor can change the agreement without the franchisee’s consent
• what will happen when the franchise agreement ends
• how the franchisee’s business will be affected if the franchisor goes into administration.

Before entering into a franchise agreement, a franchisor must receive from a prospective franchisee signed statements that they have received advice from an independent legal adviser, business adviser and/or accountant about the proposed franchise agreement, or that they have been told that they should seek these kinds of advice but have decided not to do so.

We strongly encourage prospective franchisees to seek all of these types of advice from professionals who are experienced in franchising matters. The cost of obtaining quality advice is often justified by what the prospective franchisee is risking to enter the franchise business (e.g. a mortgage on the family home).