Legal Documents You Need To Franchise Your Business

Franchising can be a rewarding experience, but it is a significant step for your business. Importantly, you’ll need to make sure you have the right legal documents in place to undergo the franchising process. 

Here’s what you need to know about franchising in New Zealand and the documents you’ll need.

Why Should I Franchise? 

There are many advantages to franchising—particularly as it is commonplace for the franchisee to fund and provide capital for the franchise. 

Franchising allows businesses to scale and grow, which helps your brand capture more of your market and create goodwill. Customers will become more familiar with your business and brand name! 

And, just because you’re leaving your business in the hands of your franchisee, it doesn’t mean that you’ll have no control over the business. While empowering other business owners, you can still ensure and maintain the quality of your products or services. These are the types of things you’ll need to capture in your Franchise Agreement. 

What Documents Do I Need To Franchise? 

While there are many advantages to franchising, it’s a big commitment, as franchising is a highly regulated area. 

In New Zealand, franchises are subject to the Fair Trading Act and the Franchise Association of New Zealand (FANZ) Code of Practice. It is crucial to adhere to these rules and regulations as there are significant consequences for non-compliance, including potential legal claims from the franchisee.

There are certain legal documents that will need to be put in place when franchising your business. Some of these include: 

• Franchise Agreement: This is the document between the franchisor and franchisee that solidifies the relationship in writing. It allows the franchisee to carry on business in accordance with the processes and marketing strategy decided by the franchisor. Typical terms in these agreements include marketing fees, royalties, training given to franchisees, performance criteria, etc.  
• Disclosure Document: This document provides prospective franchisees with important information about the franchise system. It also gives existing franchisees information about conducting business. This document will typically have information like pending litigation against the franchisors/directors, contact details of the current franchisees (unless confidential), initial and upkeep costs to operate the franchise, and termination procedures (e.g. options to renew).
• Confidentiality and Restraint of Trade Annexure: This ensures that franchisors can prevent franchisees from using the franchisor’s IP, competing with the franchisor in the same market, or protecting the franchisor’s goodwill.
• Deed of Prior Representations: This document outlines the representations the franchisee was made to believe before entering into the Franchise Agreement. This is particularly useful in cases where there are third parties like agents involved, who make representations when recruiting franchisees. Franchisors can then choose not to enter into the Franchise Agreement if they believe some of the representations may not necessarily materialise—in order to avoid misleading the franchisee. 

Franchising Resources

Laws around franchising can be quite complex, and it is an area of law that requires expert legal help. We have a number of resources to guide you in various stages of the franchising process, such as:

• Selling A Franchise
• What To Do At The End Of A Franchise
• 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

Talk To A Lawyer 

Having a lawyer to prepare your Franchisor Package is extremely useful as they can walk you through all of the basic requirements under New Zealand franchising laws. They can also properly draft any documents to reduce the risk of any misunderstandings and complex disputes. 

Taking your business in a direction which is highly regulated can seem daunting, but we’re here to help! 

Feel free to get in touch with us at [email protected] or on 0800 002 184 for more information! We’re available any time for a free, no-obligation consultation.

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