Plan Franchise Cooling-Off Procedures in New Zealand

When franchising an existing New Zealand business, signing your first agreement can feel like the finish line. However, a cooling-off provision may allow the franchisee to withdraw shortly afterwards. Before recruiting, establish how your business will handle that possibility. A clear procedure protects working relationships across your franchise community and helps prevent premature spending, confused deadlines and arguments over refunds.

Understand where cooling-off rights come from

New Zealand has no franchise-specific legislation governing the ongoing franchisor–franchisee relationship, no statutory franchise registration process and no universal statutory franchise cooling-off period. General laws still apply, including contract law and laws governing competition, intellectual property, employment, privacy and consumer dealings.

The Fair Trading Act 1986 is particularly relevant to recruitment. It prohibits misleading or deceptive conduct, unsubstantiated representations and unconscionable conduct in trade. Your explanation of withdrawal rights must therefore match the agreement: do not tell candidates they can walk away without cost unless that is genuinely what the terms provide.

Membership of the Franchise Association of New Zealand (FANZ) is voluntary, but members must comply with its Code of Practice and Ethics. The Code requires franchise agreements to contain a cooling-off provision of at least seven days from entry into the franchise agreement, or preliminary agreement where applicable. During that period, the franchisee may elect to withdraw by formal notice.

For non-members, any contractual cooling-off right needs to be checked in the relevant agreement. Do not assume that either the FANZ period or its requirements automatically apply to every franchise offered in New Zealand.

Separate disclosure, signing and withdrawal deadlines

Pre-signing disclosure and post-signing cooling-off serve different purposes. One gives candidates time to assess the opportunity before committing; the other provides an agreed route to withdraw afterwards.

For FANZ members, the disclosure document must be supplied at least 14 days before signing the franchise agreement, or before the candidate becomes bound by a preliminary agreement. Cooling-off is not a substitute for that earlier disclosure period.

Ask your franchise lawyer to map the sequence for your proposed documents, especially if you intend to use a reservation or preliminary agreement. A document described informally as a “holding form” should not slip outside your legal review simply because the full agreement comes later.

Create a signing checklist recording:

• Which documents were provided, and when.
• The earliest permissible signing date under the applicable requirements.
• The date of entry into the relevant agreement.
• The cooling-off deadline, calculated under the actual wording.
• The permitted notice methods and designated recipient.

Have a second person check the dates. Avoid relying on a salesperson’s diary or an automated reminder whose settings nobody has verified.

Control payments and irreversible commitments

The operational risk is often not withdrawal itself, but expenditure incurred before the withdrawal window closes. Equipment orders, premises commitments, travel bookings and recruitment activity can create costs that are difficult to reverse.

Build an internal approval gate for this period. List which activities may proceed, which require specific approval and which should normally wait. For example, an introductory planning meeting may be straightforward to reschedule; bespoke fit-out work is a different proposition.

Ask your lawyer to explain exactly how the agreement treats payments if the candidate withdraws. Confirm the handling of deposits, initial fees, any permitted deductions and the timing of repayment. Do not invent a standard deduction or treat all payments as non-refundable merely because they have reached your bank account.

Your finance procedure should identify each payment and retain supporting records for any proposed deduction. Keep enough cash available to meet the applicable repayment obligations rather than immediately using incoming franchise fees to fund expansion.

A cooling-off clause in the franchise agreement may not release the candidate from separate obligations to a landlord, lender or supplier. Flag that distinction and encourage independent advice before those commitments are made.

Rehearse a withdrawal before recruiting

Test the procedure with a realistic scenario: a franchisee sends a withdrawal notice late on the final day to the address specified in the agreement. Who monitors that address? Who checks the notice, stops pending orders and instructs finance?

Nominate a responsible manager and a deputy. Prepare a neutral acknowledgement that confirms receipt without prematurely deciding whether the notice is valid or what refund is due. Escalate uncertainty to your lawyer promptly rather than debating legal wording through sales messages.

Keep a record of the notice, relevant dates, advice received, repayment calculation and closure actions. Review any process weaknesses without treating a lawful withdrawal as misconduct.

Practical takeaway: Before accepting your first signature or payment, have your lawyer confirm the cooling-off terms, then rehearse the notice, spending-control and repayment process with your team.