Buying a franchise gives you the right to run an established business and sell a prescribed product or service. Before you buy a franchise, you should consider the same issues as when purchasing any other business in addition to the specific issues of franchising.
Complying with the Franchising Code of Conduct
As a franchisee, you are required by law to comply with the Franchising Code of Conduct. The Code sets out your rights, obligations, what information franchisors must disclose to you, what your franchise agreement must contain, and what procedure you must follow for resolving disputes.
Understanding your tax obligations
You will also need to understand your tax obligations and how franchising payments and fees are treated for tax purposes. You may also need to consider whether there may be Capital Gains Tax (CGT) and Goods and Services Tax (GST) payable when you buy, sell, transfer or terminate a franchise.
Entering a franchising agreement
The franchise agreement is a legally binding document spelling out the rights and responsibilities of both the franchisor and franchisee. Before you sign an agreement you should obtain as much information about the franchise as possible.
Resolving franchising disputes
If a dispute occurs and it cannot be resolved between you (the franchisee) and the franchisor, the Office of the Franchising Mediation Adviser (OFMA) may be able to help you resolve it without going to court.
