14 Jun Breath of fresh air for Hog’s – reminders for franchisees and commercial lawyers
Earlier this year it was announced that the two remaining locations of Hog’s Breath Café in South Australia were being forced into liquidation. This resulted in outrage from the wider community, with the sudden nature of the announcement causing significant inconvenience and turmoil to employees of the franchise and those who had made prior reservations at the restaurant. In a swift turn of events, Hog’s have announced that they will re-open their doors at Glenelg under new management in hope of reigniting the success that the restaurant chain have known in the past.
This incident is a stark reminder that when entering into a franchise, due diligence must be carried out in relation to any legal documents you are signing as well as the Franchise Agreement. A franchisee typically has significant obligations under the agreement in an insolvency event, and those obligations can extend to the individual through personal guarantees.
A senate inquiry into the operation and effectiveness of the Franchising Code of Conduct produced a report earlier this year. This report advised that it is vital for a prospective franchisee to obtain ‘professional and informed legal and accounting advice before entering into a franchise agreement or contracts related to a franchise opportunity’. (Parliamentary Joint Committee on Corporations and Financial Services – Fairness in Franchising March 2019 at 18.39).
It is important to be aware of the support that you will receive once you have entered into the Franchise Agreement, as this can have a significant effect on the profitability of your franchise. Franchisees must also remember that a successful business chain does provide you with a secure customer base.
At Belperio Clark we have experienced commercial and franchise lawyers that are able to assist in advising you with your franchising inquiries and issues.
Please feel free to contact one of our friendly team to book an appointment on (08) 8212 1322.