Purchasing an existing franchise business in Victoria can be both exciting and nerve-wracking.It is important for future franchisees to minimise their risks of purchase by obtaining proper legal (and financial) advice prior to entering into a franchise agreement. We are here to assist you in navigating various legal issues for the purchase of a franchise business in Victoria.

Here are some top tips before you purchase a franchise business in Victoria:

Important Financial Statements Of The Business

This includes financial statements (such as balance sheets and profit and loss statements) for the current financial year and financial statements for the last three (3) financial years. You need to consider whether the franchise business and franchisor are profitable in running the franchise business.

Franchise-Related Fees

These fees can include the franchises establishment, ongoing royalties, marketing, training, premises fit-out, equipment, inventory, franchise transfer and costs of assignment. You need to think about whether you can operate the franchise business with a view to profits considering the fees payable to the franchisor.

Legal Compliance

You need to consider whether you need licences or permits to operate the franchise business, any restrictions on selling, staffing, pricing and supply arrangements, whether your intellectual property in the branding and products is protected, whether a Franchising Code of Conduct and a Disclosure Document are provided to you and etc.

The Premises Of The Franchise Business

You should consider whether the franchisor is leasing the business premises to you, whether the lease permit assignment and any conditions to the grant of an assignment, lease term coincidence with the franchise term, the right of renewal of lease term and so on.

Understanding Of The Franchise Business And The Franchisor

Some issues to consider are:

-       How long has the franchise business being operating?

-       Have you considered the market, customer base and products of the franchise business?

-       Have you examined the suitability of the exclusive / non-exclusive territory and site selection of the franchise business?

-       Who are the competitors of the franchise business and whether the competition is increasing or decreasing?

-       Whether the franchisor has complied with the Franchising Code of Conduct?

When you apply, or express an interest in becoming a franchisee, the franchisor is required to provide you with copies of the following documents:

1.    The information statement;

2.    The disclosure statement;

3.    The franchise agreement;

4.    The franchise code of conduct;

5.    Lease / premises licence agreement.

Before you commit to purchasing a franchise business, all documents must be carefully reviewed and scrutinised. It is advised that you seek professional advice from a lawyer with experience in reviewing franchise documentation to ensure you understand your responsibilities and that your interests are protected. There are many complex issues to consider prior to purchasing a franchise business in Victoria.

If you have any legal queries regarding the purchase of a franchise business, feel free to contact Longton Legal’s general commercial law team. Longton Legal Melbourne Office’s phone number is 03 9670 1199.

*Disclaimer：This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice before taking any course of action.*