Small business

Franchise agreement

The franchise agreement is the contract between you and a franchisee. It sets out each party’s rights and responsibilities in relation to the franchised business, as well as each other.

The franchise agreement you provide during the pre-entry disclosure period must be in the form in which it is to be executed. This means that you cannot simply give a draft copy of the agreement.

However, you may make changes to the franchise agreement within the 14 day pre-entry disclosure period if the change is to:

Disclosure document

The Code requires you to maintain a disclosure document. You are required to provide a disclosure document to a person proposing to enter into, renew or extend a franchise agreement.

The purpose of a disclosure document is to give a prospective franchisee key information about the franchise system, and an existing franchisee current information about the running of the franchise.

Information you are required to disclose includes:

Information statement

When a person proposes to enter into a franchise agreement for the first time (as opposed to renewing or extending an existing agreement), you must provide them with a copy of the information statement contained in Annexure 2 of the Code. The information statement is a generic statement that highlights the risks and rewards of franchising.

The information statement should be provided to the prospective franchisee as soon as practicable after they formally apply, or express an interest in, acquiring a franchised business.