Do I need a lawyer to review a franchise agreement before buying a café franchise in Suva?

Thank you for your enquiry regarding the café franchise opportunity and the request that you sign the franchise agreement within 10 days.

Before signing any franchise agreement, particularly one with a short decision timeframe, it is important to understand that franchise arrangements are typically highly weighted in favour of the franchisor. Under Fiji law, there is no standalone franchise-specific legislation, which means your rights and protections will largely depend on the wording of the agreement itself and general principles of contract and commercial law.

Based on the issues you have raised, the following matters require careful consideration:

1. Time Pressure to Sign
A requirement to sign within a short period is a common franchising tactic but presents risk. You should not sign until you have fully reviewed and understood:

- your financial obligations,
- the extent of the franchisor’s control over your business, and
- the circumstances in which the agreement can be terminated.

Once signed, franchise agreements are difficult and costly to exit.

2. Royalties and Marketing Levies
You should closely examine:

- the percentage and calculation method for royalties,
- whether royalties are payable regardless of profitability,
- how marketing levies are used, controlled, and accounted for, and
- whether there is any obligation on the franchisor to demonstrate value or benefit from marketing expenditure.

These ongoing payments can significantly affect cash flow and profitability.

3. Supplier Restrictions
Strict supplier requirements can:

- increase operating costs,
- limit your ability to source competitively priced goods, and
- create dependency on franchisor-approved suppliers.

You should confirm whether:

- supplier prices are fixed or variable,
- alternative suppliers can be approved, and
- rebates or commissions are received by the franchisor from suppliers.

4. Termination Provisions
Termination clauses are one of the most critical risk areas. You should review:

- the grounds on which the franchisor can terminate the agreement,
- whether termination can occur without fault or with limited notice,
- your rights (if any) to remedy alleged breaches, and
- the consequences of termination, including loss of goodwill, branding, and any restraints on trade.

In many franchise agreements, termination provisions are broad and heavily favour the franchisor.

5. Control vs Independence
You should be aware that, despite being described as a “business owner,” franchisees are often subject to strict operational controls, including:

- pricing,
- menu items,
- staffing practices,
- opening hours, and
- branding and marketing.

This limits your ability to independently adapt or respond to market conditions.

6. Financial Risk and Guarantees
You should also check whether:

- personal guarantees are required,
- security over assets is demanded, or
- ongoing fees continue to be payable even if the business underperforms or closes.

Next Steps
We strongly recommend that the franchise agreement be reviewed in full before you commit. A proper review would assess:

- legal risk,
- commercial fairness, and
- whether the agreement is appropriate for your financial and business objectives.

If you wish, we can review the proposed agreement and provide specific advice on:

- risk exposure,
- termination and exit options, and
- points for negotiation with the franchisor.

Kind regards,
Lal Patel Bale Lawyers