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Buying a franchise is exciting news. Yes, it can be an involved and complicated process, but the prospect of having your own show to run while also having the support of the franchisor is an appealing one.
Once the agreement is signed and the champagne cork popped, what’s next?
The Franchise Background
If everything has been ticked off along the journey so far, then you’ll have a broad understanding of what is involved in running your franchise. Essentially, all of this should be clearly laid out in your Franchise Agreement and the operations manual provided by the franchisor.
As no two franchises are the same, you will surely have scrutinised the agreement, familiarising yourself with your legal obligations. However, you might not yet have fully grasped the context or implications of some of the clauses. It is always a good idea to cross-check these details with expert advice – for example, you can read our article on what makes a contract legally binding to better understand your position.
Similarly, while you may have given the operations manual a thorough read, the finer details often only become apparent once your franchise is up and running. In 2025, as the franchising landscape evolves, it is more important than ever to stay updated with any amendments to relevant laws and industry standards. Our recent guide on legal requirements for starting a business includes the very latest information that could impact your day-to-day operations.
A franchise agreement allows you, the franchisee, to operate your business under the business name, branding, systems, and intellectual property of the franchisor. Understandably, the franchisor has a very vested interest in your success – their business name and reputation are at stake. That’s why considerable effort is made to establish the right support, training, structures, and processes to help you flourish. For additional insights into setting up your business structure correctly, do refer to our Sole Trader vs Company guide.
Trust and goodwill are vital for maintaining a robust and enduring business relationship that nurtures growth and success. Both you and the franchisor should share the common goal of building a reputable, profitable enterprise.
So, you need to fulfil your side of the bargain.
Your Ongoing Obligations
Broadly, you have the following obligations:
- To act in good faith
- To comply with the franchise business model as set out in the contract documentation
- To meet your financial obligations
- To run your business lawfully
- To follow the dispute resolution process when necessary
Let’s look at these in more detail.
Acting In Good Faith
As mentioned, trust and goodwill are essential components of the franchise relationship. Both you and the franchisor invest substantially in this commercial venture – you through your time, effort, and finances, and the franchisor in its support systems and the risk to its brand reputation.
It is, therefore, a statutory obligation under the Fair Trading Act 1986 that you act in good faith. This means acting honestly, cooperatively, and with the overall commercial interests of the business in mind, without any hidden agenda. A recent update to our business structure guide also highlights the importance of these ethical practices for long-term sustainability.
As with any partnership, a positive, transparent attitude will yield rewards. Think of yourself as part of a team, acting with the collective interest at heart. By helping to promote and protect the business name and its reputation, both parties stand to benefit. Acting in good faith is the bedrock upon which success is built.
Compliance With The Business Model
The franchisor has developed the business model for a reason – extensive research and practical experience have demonstrated that this particular set-up offers the greatest chance of success. Significant investments have been made in areas such as legal fees, accounting, and infrastructure to refine the model.
You might have your own innovative ideas to improve the business; however, it is important to recognise that there can be a disconnect between what you deem best for your franchise and what is beneficial for the franchise network as a whole. Our article on exclusive territory clauses explains why a standardised approach is often crucial.
For instance, bulk-buying strategies that realise economies of scale may require the franchisor to designate a sole supplier, even if you have a preference for an alternative. These stipulations were set out in writing in your franchise agreement so that you could carefully weigh the pros and cons before committing.
The franchise agreement outlines your main obligations as a franchisee and should provide detailed guidance on how to operate your business, including specifics such as:
- What products or services you may supply
- Where to source your supplies
- How to market your business
- The fees you must pay the franchisor
- Your ongoing reporting requirements
- Consent or notice requirements for certain activities
- Maintenance of any equipment or premises
Any questions or concerns about potentially straying from your agreement should be addressed promptly, ensuring issues can be resolved before they escalate. For further clarity, our Service Agreement insights might be useful.
An operations manual is typically provided by the franchisor and, when referenced in your franchise agreement, becomes part of your legally binding contract. This manual is often more specific and addresses the day-to-day operations of the business, detailing standards and procedures – such as:
- Specifications of the goods or services
- Particular supplier requirements
- Advertising and marketing strategies
- Designated software or systems to be used
- Operational procedures to follow
You should have had the chance to review and clarify these details before signing your franchise agreement; however, any new issues or queries should be raised as soon as possible.
Meeting Your Financial Obligations
The appeal of a franchise model, particularly in 2025, lies partly in the support provided under an established umbrella brand. You pay for the benefits associated with this ready-made system: the processes, training, logo, name, and national marketing efforts – not to mention the infrastructure.
Accordingly, the fees you are required to pay may include:
- The upfront buy-in or purchase price
- A royalty or ongoing fee, typically calculated as a percentage of sales
- A contribution to a marketing fund or a fixed marketing charge
- Fees associated with the maintenance or upgrade of premises or supplied equipment
- A possible renewal fee at the start of a new contract period
- Any training costs required by the franchisor
While it is in the franchisor’s interest that you succeed financially, the day-to-day management of finances is ultimately your responsibility. You need to manage your budget, keep meticulous financial records, and ensure you meet all audit and reporting requirements. In 2025, leveraging modern accounting software and perhaps engaging an accountant or bookkeeper – as discussed in our business set-up guide – can make a significant difference.
It is also worth noting that whilst you are obligated to contribute to specific funds, you usually do not have a say in how these funds are allocated. This can sometimes lead to disputes, but understanding your contractual commitments will help manage expectations. Our guide on franchise fees provides further clarity on this matter.
Running Your Business Lawfully
Every franchise is unique and, depending on the nature of the goods or services offered, will be subject to various legal regulations. Staying compliant is essential. In 2025, with evolving statutory requirements, it remains crucial to understand and obey the relevant laws. For instance, our updated resource on legal requirements for starting a business reflects the current standards.
Some examples of legal obligations include:
- If you employ staff, you must comply with the Employment Relations Act 2000 and the Holiday Act 2003. These govern salaries, working hours, leave, and other entitlements.
- Work Health and Safety laws outline requirements to ensure a safe working environment for your employees.
- Operating in regulated industries, such as food, necessitates strict adherence to food safety standards.
- Licensing laws may affect your business – for example, licences are required for selling alcohol or medications.
- If you collect personal information about customers or employees, you must adhere to the Privacy Act 2020.
- Compliance with accounting and taxation laws is also mandatory.
- Should you lease premises, ensuring you comply with your lease terms is essential.
To ensure your business operates lawfully, it might be necessary to seek legal or accounting advice. Operating above board not only protects your business reputation but also saves time and money in the long term.
Following The Dispute Resolution Process
If you enter into your franchise with the right intentions, act in good faith, meet your contractual and financial obligations, and run your business lawfully, you will have laid a strong foundation for a positive franchisor–franchisee relationship and a successful business that reflects well on both parties.
However, sometimes challenges do arise. There are many reasons why a franchisor-franchisee relationship might encounter difficulties. Stay proactive by educating yourself about all obligations, understanding that the franchisor must remain profitable too, and maintaining open communication by disclosing any issues that may adversely impact the franchise.
If a dispute does occur, the Franchise Association of New Zealand (FANZ) provides a framework for mediation. While the franchisor may have the right to terminate the agreement under certain circumstances – such as insolvency, licence loss, or criminal convictions – both parties generally benefit from attempting to resolve issues amicably. You might also find it useful to review our guide to terminating a franchise agreement for clarity on your rights and obligations.
If the franchisor believes you are not in compliance, they can issue a written notice setting out the breach and steps for rectification. Conversely, if you believe the franchisor is not upholding their contractual commitments, you can issue them with a written notice in the required format. Should this notice not lead to a resolution after the stipulated period, mediation through FANZ can be sought, which even has the authority to impose fines or injunctions.
It’s crucial to fully understand your dispute resolution options, ensuring you are well-prepared should conflicts arise.
Franchising Resources
Franchising law can be complex, and navigating it successfully often requires expert guidance. We offer a range of resources to assist at various stages of the franchising process, including:
- 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
- Franchise Grant Process
Additionally, for those seeking further assistance on general business setup or legal reviews, our vast collection of legal guides, including our Legal Essentials for Small Businesses, may be particularly helpful.
Need Help?
Embarking on an exciting new venture running a franchise business means that you must be fully aware of your ongoing obligations. While this may seem a bit daunting at times, we’re here to help you navigate the process with confidence.
Reach out to our team for a free, no-obligation chat at [email protected] or call us on 0800 002 184 today.
Remember, staying informed and proactive is your best strategy for success in the dynamic franchising landscape of 2025.
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