Inside Franchise Business - - Contents - JENNY NEED­HAM Se­nior as­so­ciate, Piper Al­der­man MICHAEL BACINA Part­ner, Piper Al­der­man

Sign your way through the es­sen­tial pa­per­work.

Thanks to tech­nol­ogy, you can now set up companies as well as ap­ply for ABNs, busi­ness names, loans, in­sur­ances and li­cences on­line. Yet many as­pects of set­ting up a busi­ness still re­quire you to deal with vol­umes of pa­per­work.

As you set up in busi­ness as a first-time fran­chisee, you will be con­fronted with a pile of doc­u­ments and

reg­is­tra­tions you need to process.

There are four main cir­cum­stances in­volv­ing pa­per­work you may face if you are buy­ing into a fran­chise:

• You ap­ply for a busi­ness loan

• You ap­ply for cer­ti­fi­ca­tion and/or a li­cence nec­es­sary for your new busi­ness

• You ap­ply to en­ter into a lease for your premises

• You re­ceive the doc­u­ments re­lat­ing to the fran­chise, such as the fran­chise agree­ment and the dis­clo­sure doc­u­ment.

Most new fran­chisees will prob­a­bly need a loan to fund ei­ther set­ting up the busi­ness or buy­ing out an ex­ist­ing fran­chisee. Whichever the case, you need to en­sure your pa­per­work is in or­der if you are to be suc­cess­ful with your loan ap­pli­ca­tion.

While many fi­nan­cial in­sti­tu­tions let you to start your loan ap­pli­ca­tion on­line, com­plet­ing the pro­ce­dure usu­ally re­quires you to:

• Re­view the loan agree­ment in pa­per form

• Re­view any guar­an­tees at­tached to the loan agree­ment

• Sub­mit per­sonal fi­nan­cial doc­u­ments in sup­port of the loan agree­ment. To carry on a busi­ness in cer­tain in­dus­tries, even as a fran­chisee, you may need a li­cence. For ex­am­ple, if you will be serv­ing al­co­hol on your premises, you will need to ob­tain a liquor li­cence.

In New South Wales, cer­tain types of liquor li­cences (such as those for ho­tels and bars) re­quire you to con­sult with the com­mu­nity and pre­pare a com­mu­nity im­pact state­ment.

Sim­i­larly to li­cens­ing, you may need cer­ti­fi­ca­tion to run your busi­ness. For ex­am­ple, in New South Wales cer­tain food busi­nesses must hold Food Au­thor­ity cer­ti­fi­ca­tion, such as an FSS (Food Safety Su­per­vi­sor) cer­tifi­cate, de­pend­ing on the type of food be­ing served to cus­tomers.

When it comes to your busi­ness premises, if your fran­chisor does not hold the lease or ne­go­ti­ate one on your be­half with the lessor, you will need to do this your­self. It is bet­ter to en­gage an agent or so­lic­i­tor for this.

All lessors work dif­fer­ently, but most will need pa­per­work from you to sup­port your lease ap­pli­ca­tion. This gen­er­ally in­volves fi­nan­cial doc­u­ments re­lat­ing to you or any busi­ness part­ner, your com­pany or pro­posed trad­ing en­tity, and any other pro­posed lessee.

Once your lease ap­pli­ca­tion is ac­cepted, you will need to read all the

All lessors work dif­fer­ently, but most will need pa­per­work from you to sup­port your lease ap­pli­ca­tion.

terms of the lease agree­ment pro­vided to you. This is a good time to seek le­gal ad­vice.

In gen­eral, lease doc­u­ments are vo­lu­mi­nous, of­ten ex­ceed­ing 50 pages.

But wait, there are more doc­u­ments yet...

Un­der the Fran­chis­ing Code of Con­duct, the fran­chisor must pro­vide you with cer­tain doc­u­ments:

• The in­for­ma­tion state­ment

• The pro­posed fran­chise agree­ment

• The dis­clo­sure doc­u­ment

• A copy of the Fran­chis­ing Code of Con­duct (com­monly re­ferred to as “the Code”).

The in­for­ma­tion state­ment is a stan­dard doc­u­ment high­light­ing some of the risks and re­wards of fran­chis­ing, and must be pro­vided to all new prospec­tive fran­chisees.

The fran­chise agree­ment is the con­tract be­tween you and your prospec­tive fran­chisor. It sets out the rights and obli­ga­tions of the fran­chisor as well as your rights and obli­ga­tions as fran­chisee.

Find in the dis­clo­sure doc­u­ment in­for­ma­tion im­por­tant for run­ning the fran­chise busi­ness. It should in­clude back­ground de­tails of the fran­chisor and an in­sight into the cor­po­rate struc­ture of the fran­chise net­work. This will en­able you to make an in­formed de­ci­sion as to whether you ac­cept and sign the fran­chise agree­ment.

As well as the doc­u­ments re­quired by the Code, and de­pend­ing on the fran­chisor, you will of­ten also re­ceive the fol­low­ing doc­u­ments:

• A cer­tifi­cate un­der sec­tion 10 (1) of the Code

• A cer­tifi­cate un­der sec­tion 11 of the Elec­tronic Trans­ac­tions Act 1999

• A li­cence to oc­cupy the premises (if the fran­chisor holds the lease)

• A sup­ply agree­ment ( or more than one) for the sup­ply of the goods to the busi­ness

• A fitout agree­ment ( to pre­pare the premises for your busi­ness)

• A gen­eral se­cu­rity deed

• Var­i­ous au­thor­i­ties, such as a trust ac­count au­thor­ity al­low­ing the fran­chisor’s so­lic­i­tors to re­lease any monies to the fran­chisor they hold on your be­half in their trust ac­count. Join­ing a fran­chise busi­ness can be ex­cit­ing and re­ward­ing.

Just en­sure you are aware of the de­tails in all the pa­per­work, as this will help po­si­tion you to suc­ceed.

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