Franchising costs that can't be passed on

Legal costs of franchising documents

Franchisors can only pass on the legal costs of preparing, negotiating and executing the franchise agreement.

A franchisor can only require the franchisee pay a fixed amount for these costs when:

• the costs are reasonable and genuine, and
• the fixed amount for the costs is specified in the franchise agreement.

The franchise agreement must also state that the amount:

• is for the franchisor’s legal costs of preparing, negotiating or executing the agreement
• doesn't include any amount for the franchisor’s cost of legal services for preparing, negotiating or executing other documents provided after the agreement is entered into.

Costs of settling a dispute

When settling a dispute, franchisors cannot pass on their legal costs to franchisees.

Franchisors cannot include terms in a franchise agreement that requires the franchisee to pay the franchisor’s costs in relation to settling a dispute.

If franchisors and franchisees start an alternate dispute resolution process or a voluntary arbitration process, they usually must share the process-related costs equally.

Franchisors and franchisees must pay their own dispute resolution costs.

Payments made by prospective franchisees

Franchisees can get all or some of their money back if they end the agreement during the 14-day cooling-off period.