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Should Franchisees Delay signing Franchise Agreements?

Posted on 3 November 2014

With the proposed changes to the Franchising Code of Conduct due to commence on 1 January, 2015, is there any benefit for franchisees to wait to sign a franchise agreement?

If there is no urgency to sign the franchise agreement or to start the franchised business then the answer may be "yes".

The changes oblige franchisors to disclose more information in their disclosure documents.  This information may be invaluable for a potential franchisee in deciding to enter into a franchise system.

Restraints of trade may not be enforceable against franchisees if, amongst other things, a franchisee seeks to renew a franchise agreement on substantially the same terms of the current franchise agreement, the franchise agreement contains a right to renew and the franchisor does not agree to renew.

Franchisees and potential franchisees need to consider these changes and their timing in their decision making process.

 

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