Buying a NZ Franchise: Check the Confidentiality Agreement

Before sharing detailed financial information or business systems, a franchisor may ask you to sign a confidentiality or non-disclosure agreement (NDA). Protecting confidential material is understandable within the franchise community, but an NDA is still a contract. Check that it lets you investigate the opportunity properly without quietly committing you to obligations beyond keeping information confidential.

1. Identify what you are agreeing to protect

Start with the parties. Is the agreement with the franchisor, an existing franchisee selling their business, or both? Check who is entitled to disclose the information and who can enforce the agreement. If you intend to buy through a company, ask your lawyer whether you should sign personally, on the company’s behalf, or both.

Next, examine the definition of confidential information. It might cover financial records, customer details, pricing, operating methods, conversations and even the fact that negotiations are taking place.

A broad definition is not automatically inappropriate, but you need to understand its boundaries. Ask your lawyer whether the agreement appropriately excludes information that:

• Is already publicly available, other than through a breach.
• You lawfully knew before receiving it.
• You independently develop without using the disclosed material.
• You lawfully receive from another source without a confidentiality restriction.

Check how oral disclosures are treated. If everything said in a meeting is confidential, keep a clear record of what was discussed and who attended. Do not assume information becomes free to use simply because it was not marked confidential.

2. Preserve access for your advisers and lender

An NDA should enable due diligence, not prevent it. You will usually need to discuss the opportunity with a franchise-experienced lawyer and accountant. A lender may also need financial information before deciding whether to offer finance.

Look for express permission to share relevant material with these people for the purpose of assessing and financing the proposed purchase. A reference to “professional advisers” may not clearly include a bank, a prospective business partner or a company that will buy the franchise.

Ask these practical questions:

• Must each recipient sign a separate confidentiality agreement?
• Is prior written approval required before sharing anything?
• Are you responsible for every recipient’s conduct?
• Can advisers retain records needed for professional or legal purposes?
• Is disclosure required by law appropriately addressed?

Also check the permitted purpose. Permission merely to “consider the franchise” may need clarification if you will use the information to prepare a finance application or obtain specialist advice.

Do not forward documents to friends or upload them to shared online services without checking permission. Use controlled access and keep a record of who receives sensitive files.

3. Separate secrecy from a commitment to buy

Read beyond the confidentiality clauses. A document headed “NDA” may also contain exclusivity provisions, restrictions on approaching staff or suppliers, payment obligations, or promises not to pursue competing opportunities.

These provisions can affect your freedom to compare brands, investigate concerns or walk away. Ask your lawyer to identify every obligation that is not simply about protecting information. In particular, check whether signing starts a purchase process that you cannot leave without cost.

New Zealand has no franchise-specific statute governing franchise sales and no compulsory franchise registration system. General law applies, including the Contract and Commercial Law Act 2017 and the Fair Trading Act 1986. The latter prohibits misleading or deceptive conduct and unsubstantiated representations; confidentiality wording does not make inaccurate sales claims acceptable.

Membership of the Franchise Association of New Zealand (FANZ) is voluntary, but member franchisors must comply with its Code of Practice. This includes disclosure timing requirements before signing a franchise agreement or becoming bound by a preliminary agreement to proceed. If an NDA contains purchase commitments, ask your lawyer whether those requirements are engaged. The document’s title is not enough to answer that question.

4. Plan what happens if you decline

Check how long confidentiality obligations last and whether different types of information receive different treatment. Do not assume they end when discussions stop.

Understand the return and deletion requirements too. Can you realistically remove material from email, backups and shared folders? Seek appropriate exceptions for legal record-keeping and advisers’ retained files, with continuing confidentiality protection.

Ask your lawyer to explain any indemnity, specified payment for breach or provision concerning injunctions. Do not treat these as harmless boilerplate: a breach could expose you to a claim even if you never buy the franchise.

Practical takeaway: Have the NDA reviewed before signing, secure permission for essential adviser and lender access, and confirm that keeping information confidential does not commit you to purchasing the business.