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Franchising Options and Obligations

Describe about the Report for Business Law and Due Diligence of Muffin Break.

Muffin Break arrived in Australia 25 years back in 1989 in Coolangatta. Since then Muffin Bread’s famous award signing coffee and baked bread are now available across Australia, New Zealand, India and UK (Muffin Break, 2016). It is the first systematic franchise company to initiate baked products which are freshly made on site itself and also the first in the market with an offer to sell espresso coffee having a great quality. In Australia it is seen today that the concept of Muffin Bread has continued to flourish in the market despite having such a competitive retail market for food business. Since 1989 it has opened over 280 bakery cafés. It has a history of giving returns in such a competitive market on investments to different franchise owners. It is continuing to impress people with having a same store sales growth in all of its stores across country (Franchise Business, 2016).

Behind the Brand’s Biggest success stands best working systems of business and a support team of operations which is highly resourced in doing work. Initially the franchisee training program which was there was the one which consisted of 3 weeks high degree business and training of operations which covers all the skills which are required to open and operate a Franchise of Muffin Bread in a successful manner. Ongoing training is also delivered through the portal of Muffin Break by way of e-learning, field support is also provided by a professionalized and committed team of experts and meeting are held quarterly.

Franchising is such an occupation which allows a business to work under the brand already established by another and also to sell the products and services for a specified period of time (Buchan & Butcher, 2009). There are mainly three types of franchise:

Product

Manufacturing and processing of product (Small Business Development Corporation, 2015).

It is a charging and honoring experience to buy a franchise, although there are some rights and obligations which are defined under the Franchising Code of Conduct which an individual should know before taking a franchise (Australian Competition & Consumer Commission, n.d.).

It is a stimulating way of doing marketing. If an individual thinks to establish a franchise he should undertake immense capital, he should be patient and should have skill. The time for establishing and making marketing could be 3 yrs or can exceed up to 5 yrs (Franchise Council of Australia, 2016).

Operational Training for Franchisees

In order to open a franchise some points are to be kept in mind prior to franchising a business (Doherty, 2007). It is one of the flourishing ways of extending a business. In today’s time large businesses have used it as a way to finance and speed up their development into brands used world over(Welch, 1989).Although, it must be planned in a proper manner:

It should be pilot tested with possession held by the company and operated outlets.

Occupation must be flourishing, typical and reproductive.

A professional advice should be taken by Chartered Accountants, a consultant of a franchise etc.

A flourishing legal advisor should facilitate a written agreement for a franchise.

Time should be taken in order to write a manual for the work of operations.

Franchisee should be chosen carefully after investigating.

Training must be provided etc (Franchise Council of Australia, 2016).

As Australia is the nation which have many franchising businesses so there is a high level of awareness about franschising.It also have the world’s most strict laws relating to franchising therefore there is no line or space for wrong to be conducted by ay new franchisor(Frazer, Weaven & Wright, 2006).

In order to operate or open a business most of the Franchisees take commercial area or premises on lease. But it should be seen that before signing a lease individual should have a knowledge regarding his or her rights and obligations and also should take legal advice from a professionalized person.

In Australia a Franchising Code of Conduct is being followed which works under the Competition and Consumer Act of 2010(Lim and Frazer, 2008). Both of the above mentioned regulations are governed by the Australian Competition and Consumer Commission (ACCC). Under the code franchisees are protected against the documents for disclosure, period’s o cooling off, marketing funds being managed and resolving disputes etc. There are also some documents which are to be given before entering into a franchise agreement such as the code, statement of disclosure, statement of information etc (Choo and Bowley, 2007). It should be kept in mind that the conduct which is being followed should be in due diligence to the franchise and should take advice of the professional experts like accountants, lawyers etc (Small business) (Welsh, Alon & Falbe, 2006).

Investigation is also a part that should be done prior to the establishment or making a commitment for taking a franchise. Investigation should be of the franchisor, industry etc.

Lease Agreements and Obligations

In the current situation as Emile and Layla have thought to open a shop called “Muffin Break” in Westfield Shopping Centre Food Court. So they have to follow all the requirements which are needed to be fulfilled by the Australian Competition & consumer Commission as Australia has been an old state in dealing with franchise business and therefore there is no point that any mistake been done by any individual. It is good to open a franchise in shopping centre as it has been tested that food is a thing which every customer wants to have whenever they are out and also it is seen that the business of franchisee is excellent for food courts.

After thinking and making up mind to enter into franchise an individual should take and decide a place or take a shop on rent or lease in a place where it can attract customers to come. One of such places is Shopping centers food court as whenever people go out for shopping the first thing they see is the joint i.e. food and sometimes it is the food which attract people to come to a specific shopping centre in which their favorite food joint is.

It is an important business decision to enter into an agreement of commercial tenancy or lease (Duncan, et al., 2012). The value of a business is being affected by a legal binding contract that is the agreement of commercial tenancy or lease. When an individual sign a lease he makes a commitment in order to pay rent for that premises or outgoing and carrying out all the other obligations specified in a lease agreement for the premises. Legal advice is necessary before making a commitment to hire or have a place on leases. Lease will not properly accepted if taken by excluding advice of the professional experts and if the individual is moving in the premises by saying or accepting the lease under an emotional way (Government of South Australia, 2016).

A lease taken for commercial purpose is taken for a specified time period ending on a specific date. Often the lease gives a right to the individual to get the lease renewed for a specific time when the earlier period ends. In a shopping centre lease an individual is required to pay a promotional amount, improvements regarding building, cost of management etc. The Retailing Lease act 1994 specifies certain obligations for lease over business premises at which different goods and services are sold is given to people where rent is below $4, 00,000 a year. The act covers issues such as:

Legal Obligations for Opening a Business in Australia

Assuring that premises is built suitably for business purpose only.

Assuring that lease is on papers and is in writing.

When the lease have come into force.

Current market rent reviews.

Cost of maintenance.

If covered under the act when lease are entered into and renewed, the lessee must be given a statement of disclosure for such a lease. It is a written document stating information required such as permitted uses provide for the shop, area which can be let out, agreement for access etc. In case of any doubt legal advice from professional experts can be taken (Government of South Australia, 2016).

If an individual have a well-structured agreement of lease, then also disputes may arise. Therefore firstly an individual should check in the lease agreement as to if any dispute resolution clause is there in it or not and thereafter work through the procedure so specified. If a business is covered under the act of retailing a lease then the party to a retail shop lease may apply to the Small business commissioner for mediation of:

A dispute which arise from or is related to the lease

A dispute related to any other matter related to the occupation of the premises or to an occupation done at the premises. In order to proceed, the other party must agree to the process of mediation. Under this act a fees is payable for the application of mediation.

As in the current situation as Emile and Layla are opening a franchise so they have to do a contract with the food court owner for taking a place on lease but at the same time they should go through the agreement of lease and should see what all is written into it.

After seeing and finalizing a place to open a shop the first thing employers do is to employ or hire people to work in their franchise. The employees they hire are good in communication skills and they mostly hire part time individuals who work on daily paid basis. All the provisions regarding the employee working have been described under the Act prevailing in Australia for employment t purpose.

The Fair Work act 2009 deals with the relationship of employer and employee in Australia (Gray, Laidlaw, 2002). It provides safety regarding fair behavior at workplace prevents any kind of discrimination done against employees and also have flexible agreements in order to work (Fair Work OMBUDSMAN, n.d.).

There are different types of employees who get different benefits as per the employment in which they are engaged into. There are full time employees, part time, casual, fixed etc.

As in the current situation the employees who are to be hired are part time employees so they have different benefits which are provided under fair work act. The part time employees:

Works for less than 38 hours per week on an average.

Work for regular hours every week.

Entitle to the same benefits which are provided to the full time employee but on a pro rata basis.

Is an employee for a contract which is for a fixed term or a permanent employee (Fair Work OMBUDSMAN, n.d.).

As Emile and layla wants to open a franchise so they will need some employees and as mentioned they are employing two part time permanent employees so they will be paid as per the Fair Work Act which defines as to what and how much will be paid to them and what will be there work.

References:

Australian Competition & Consumer Commission. ( n.d.) .Franchising. Retrieved on 25th Aug, 2016 from: https://www.accc.gov.au/business/franchising.

Buchan, J & Butcher, B.(2009). Premises Occupancy Models for Franchised Retail Businesses in Australia: Factors for Consideration. Australian Property Law Journal, Vol. 17, pp. 143-178. Retrieved on 25th Aug, 2016 from:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1476117.

Doherty, A.M.( 2007) .The internationalization of retailing: Factors influencing the choice of franchising as a market entry strategy. International Journal of Service Industry Management.18 (2). Pp. 184-205. Retrieved on 25th Aug, 2016 from:https://www.emeraldinsight.com/doi/abs/10.1108/09564230710737826?journalCode=ijsim.

Duncan,Bill,Christensen,Sharon,hoban.amy,pallavicini,Stephen,bedelis,Jamie,utz&clayton (2012). Commercial and retail leases in Australia Online [6th ed.]. Thomson Rueters, Sydney, NSW. Retrieved on 25th Aug, 2016 from: https://eprints.qut.edu.au/56753/.

Fair Work OMBUDSMAN. (n.d.) Fair work legislation. Australian Government. Retrieved on 25th Aug, 2016 from:https://www.fairwork.gov.au/about-us/legislation.

Franchise Business. (2016). Muffin Break. Retrieved on 25th Aug, 2016 from: https://www.franchisebusiness.com.au/brands/muffin-break.

Franchise Council of Australia. (2016).Franchising your business. Retrieved on 25th Aug, 2016 from:  https://www.franchise.org.au/franchising-your-business.html.

Frazer, L, Weaven,S & Wright, O.(2006).Franchising Australia. PP- 1-77.Retrieved on 25th Aug, 2016 from: https://cms-uat.franchise.edu.au/__data/assets/pdf_file/0011/575876/Franchising-Australia-2006-Report.pdf.

Government of South Australia. ( 2016). Leasing commercial property. Retrieved on 25th Aug, 2016 from:https://www.sa.gov.au/topics/business-industry-and-trade/starting-a-business/the-importance-of-location/leasing-commercial-property.

Judy Gray, Heather Laidlaw, (2002) "Part‐time employment and communication satisfaction in an Australian retail organisation", Employee Relations, Vol. 24 Iss: 2, pp.211 - 228 Retrieved on 25th Aug, 2016 from:https://www.emeraldinsight.com/doi/abs/10.1108/01425450210420929

Lawrence S. Welch, (1989) "Diffusion of Franchise System Use in International Operations", International Marketing Review, Vol. 6 Iss: 5Retrieved on 25th Aug, 2016 from: https://www.emeraldinsight.com/doi/abs/10.1108/EUM0000000001520

Lim, J and Frazer,L.(2008). Introducing Franchising Regulation An Analysis of the Australian Franchising Code of Conduct. Journal of Marketing Channels. 10(2). PP- 39-56.Retrieved on 25th Aug, 2016 from: https://www.tandfonline.com/doi/abs/10.1300/J049v10n02_04.

Muffin Break. (2016).About us. Retrieved on 25th Aug, 2016 from:https://www.muffinbreak.com.au/about-us/

Small Business Development Corporation. ( 2015).Buying a franchise. Government of Western Australia. Retrieved on 25th Aug, 2016 from:https://www.smallbusiness.wa.gov.au/business-topics/starting-a-business/buying-a-franchise-2/buying-a-franchise/.

Stephen Choo, Christine Bowley, (2007) "Using training and development to affect job satisfaction within franchising", Journal of Small Business and Enterprise Development, Vol. 14 Iss: 2, pp.339 – 352 Retrieved on 25th Aug, 2016 from: https://www.emeraldinsight.com/doi/abs/10.1108/14626000710746745.

Welsh,D.H.B. Alon, I & Falbe,C.M.(2006). An Examination of International Retail Franchising in Emerging Markets. Journal of Small Business Management. 44(1), pp. 130-149. Retrieved on 25th Aug, 2016 from:https://search.proquest.com/openview/64f61f406e77341a97c7168eef10d3bb/1?pq-origsite=gscholar.

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