Plan Independent Franchisee Advice in New Zealand

Before franchising your existing business, decide how prospective franchisees will obtain independent advice. Sending an agreement and asking for a signature is not enough to support an informed decision. A clear advice process helps candidates understand the commitment, gives their advisers time to investigate and exposes misunderstandings before they become disputes within your franchise community.

Understand the legal position

New Zealand has no franchise-specific legislation regulating the ongoing franchisor–franchisee relationship, no statutory franchise disclosure regime and no government franchise registration requirement. General laws still apply, including contract law, the Fair Trading Act 1986 and the Commerce Act 1986, alongside relevant employment, privacy and intellectual property laws.

The Fair Trading Act prohibits misleading or deceptive conduct, unsubstantiated representations and unconscionable conduct in trade. A candidate’s solicitor reviewing your agreement does not relieve you of responsibility for what you say about the business.

Membership of the Franchise Association of New Zealand (FANZ) is voluntary, but members must comply with its Code of Practice and Ethics. Under the Code, franchisors must follow requirements concerning a candidate’s acknowledgement of disclosure and independent legal advice. These include routes involving a solicitor’s certificate or a statement recording that advice has been explained or declined. Accounting advice certificates or statements may also be required by the franchisor.

For FANZ members, disclosure must be provided at least 14 days before signing the franchise agreement or becoming bound by a preliminary agreement. This is a Code requirement, not a statutory rule applying to every New Zealand franchise.

Have your franchise lawyer confirm the applicable Code requirements and design the appropriate records. Even outside FANZ membership, making room for independent advice is a sensible commercial safeguard.

Build advice into the decision timetable

Create an advice stage before asking candidates to make a binding commitment. Treat it as part of evaluating the opportunity, not an administrative obstacle immediately before signing.

Your process should identify:

• When the candidate receives the proposed agreement and supporting information.
• When their solicitor and accountant can raise questions.
• Who within your business can authorise and explain answers.
• How proposed amendments will be documented.
• What must be checked before the agreement is signed.

Give advisers a coherent set of information. Alongside the agreement, provide the material they need to assess the proposed arrangement, such as the fee schedule, financial assumptions, premises obligations and any proposed personal guarantees. Make clear which documents are drafts and which version is current.

Do not assume a disclosure waiting period means the candidate has received advice. Equally, a quick legal review does not remove a separate waiting-period obligation.

If negotiations produce material changes, send the revised documents to the candidate and allow further review. Ask your lawyer whether those changes affect the disclosure process or signing timetable. Avoid imposing opening dates that make proper consideration impractical.

Keep the advice genuinely independent

Your lawyer acts for your business. They can explain your intended franchise structure, but should not be presented as the candidate’s independent adviser. The candidate needs someone who can assess the opportunity from their perspective, including whether they should proceed at all.

Encourage candidates to choose a solicitor experienced in New Zealand franchising and an accountant who understands franchise financial arrangements. If asked for suggestions, offer options rather than insisting on one adviser, and disclose any relevant relationship or referral arrangement.

Legal and financial reviews answer different questions. A solicitor can examine termination rights, guarantees, restraints and contractual obligations. An accountant can test working capital requirements, borrowing assumptions, owner remuneration and the effect of franchise fees on cash flow.

For an existing business moving into franchising, the financial review should distinguish company-owned outlet results from the proposed franchisee’s costs. A profitable pilot does not automatically establish that a franchisee can service debt, pay fees and earn an acceptable return.

Do not promise that professional advice makes the investment safe. Its purpose is to support an informed decision, not guarantee commercial success.

Record the process without treating it as a waiver

Maintain a dated record of documents issued, questions received, answers supplied and agreed amendments. Keep written answers consistent with the final agreement; ask your lawyer to resolve any conflict rather than leaving candidates to reconcile competing explanations.

Where certificates or acknowledgements are appropriate, use lawyer-approved forms. These should record what actually happened, not merely provide a convenient signature box.

If a candidate declines advice, pause and follow your agreed procedure. Explain the recommendation again, avoid minimising the risks and obtain legal guidance on the applicable documentation. A signed acknowledgement is not a blanket defence to misleading statements or other unlawful conduct.

Practical takeaway: Before recruiting, establish a documented advice stage with clear responsibilities, realistic review time and accurate records. Independent scrutiny should help both parties make a considered commitment—not simply complete the sale.