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If you have franchised your business, then you may be looking to establish multiple franchises.
It is possible to own multiple franchises, however, managing more than one franchise has a multitude of considerations and a distinguished level of commitment compared to running a business or owning a singular franchise.
The main factors to consider are:
- Compliance with the Franchising Code of Conduct (the Code)
- Franchising documents
- ConfidentialityÂ
- LiabilitiesÂ
- Competition in the market
Before you decide to take on multiple franchises, it’s a good idea to understand how much responsibility this entails and whether your business has the capacity to take on it – read on to find out more.
Can You Own Multiple Franchises?
Yes, you can own multiple franchises. As a franchisor, you can have multiple franchises of your business in different locations. Your franchisees don’t have to be different people for each franchise location as well. In other words,one franchisee can have multiple franchises to their name.
However, this means you’ll need to take on a few more responsibilities. Owning multiple franchises means you’ll have a franchise network.
How To Manage A Franchise Network
Managing a franchise network essentially requires being on top of all the relevant business and legal aspects. All documents need to be updated regularly, and as the franchisor, it’s important to keep your franchisees in the loop at all times.
We’ve mentioned some of the most important documents you will need to keep in check below.
Operations Manual
The Operations Manual is the instrument that details key aspects of your franchise. So, keeping the operations manual up to date is imperative. An operations manual can include information around:
- The business’ finances
- Business module
- Marketing
- Equipment
- Key personnel in the franchise
- Suppliers
- Premises and location
- Best practices methodsÂ
- Products and services
- Contact informationÂ
- Emergency procedureÂ
Essentially, franchisees will be given an Operations Manual when they first purchase the franchise. It’s a good introduction to the franchise as a whole and is one of the first steps in the training or onboarding process.
Disclosure Document
When selling, renewing or extending a franchise, you need to provide potential franchisees with a Disclosure Document.
A Disclosure Document will include matters such as:
- Details about the franchise itself
- How much it currently costs to run the franchise
- Any legal proceedings the franchise may currently be facingÂ
- Contact detailsÂ
- The process for when the contract between the franchisor and franchisee endsÂ
If you are running multiple franchises, keeping this document up to date will allow your current and potential franchisees to assess the business’ affairs and make an informed decision before purchasing, renewing or extending the franchise term. .
Therefore, it’s crucial your disclosure document accurately reflects your business. A legal professional can review your documents and aid you in updating this information – chat to our team of legal consultants to learn more.
Information Statement
The information statement has been provided by the Australian Competition and Consumer Commission (ACCC) for all franchisors to give to potential franchisees. If someone expresses interest in becoming a franchisee of your business, then provide them with this information statement as soon as possible and no later than seven days after being approached by them about the business.
Franchise Agreement
The Franchise Agreement is the contract between a franchisor and their franchisee. It details key aspects of the arrangement, such as responsibilities of the parties, fees to pay and how dipsutes will be handled.
A Franchise Agreement will look different for each franchise as it should be drafted based on the business’ requirements and specific needs.
When drawing up a Franchise Agreement, it’s worth considering your obligations under the Code. Read on to find out more.
Obligations Under The Franchising Code
The Franchising Code regulates franchises in Australia. The Code was recently amended to include some pretty significant changes, so it’s important to keep up to date to ensure you remain compliant.
Under the new rules of the Code, franchisors will need to upload their Disclosure Document (mentioned above) on the Franchise Register.
When interpreting the Code, it’s wise to seek the advice of an expert lawyer who can help you understand which rules apply specifically to your business and how you can best demonstrate compliance.
What Should I Know About Franchisor Liability?
Franchisors possess liability over their franchisee’s action to a certain degree, despite the fact that they may not be personally running the business in that particular location. In other words, franchisors need to take responsibility for their franchisees’ actions in certain situations.
The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 established the responsibility of franchisors when their franchisees are in violation of certain workplace laws.
Therefore, if misconduct occurs and it is found that one of your franchisees was breaching workplace laws (for example, for not providing a safe working environment, underpaying staff or mistreating the employees), the franchisor can be held liable.
As a franchise, this is the last thing you want as it could cause some permanent damage to your reputation and position in the market.
Therefore, turning a blind eye is not an option and it is crucial that you, as the franchisor, are ensuring all you franchisees are acting in compliance with the Fair Work Act 2009.
Marketing Fund
Owning multiple franchisest means you may choose to have a shared fund dedicated to your marketing efforts. After all, running multiple franchises will require higher levels of exposure in the market. This is known as your marketing fund.
A marketing fund essentially keeps money aside for your marketing activities.Two key factors need to be in place when creating a marketing fund:
- The franchisees must be provided with a statement regarding the transactions of the fund and any relevant related information
- Unless 75% of the franchisees vote against it, the statement must be audited by a registered company auditorÂ
If you’re thinking of opening a shared fund to market your business, it’s in your business’ best interest to see a legal professional to ensure it’s being handled correctly.
Key Takeaways
Establishing multiple franchises for your business means you will be running a franchise network. It’s important to keep up with the legal aspects of your franchise network in order to avoid disputes or financial penalties towards your business.
We have a number of resources you can refer to at various stages of the franchising process:
- Selling A Franchise
- What To Do At The End Of A Franchise
- Legal Documents You Need For Franchising
- Franchise Agreements
- What Fees The Franchisee Has To Pay
- Terminating A Franchise Agreement
- What To Do With A Bad Franchisee
- Franchisees’ Legal Obligations
- What Are Franchising Royalties?
- Franchise Grant Process
If you would like a consultation regarding any of your franchise documents, regulations or franchising laws generally, you can reach our legal team at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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