In South Australia, a contract for the sale of a business where the purchase price paid is less than $300,000 (exclusive of GST) is governed by the Land and Business (Sale and Conveyancing) Act 1994 (SA). The Act sets out a number of protections for purchasers. Independent legal advice should be sought to ensure that all aspects of the sale are handled correctly, and is essential if the sale price exceeds $300,000.

The contract will provide for a settlement date when both parties finalise their obligations as set out in the contract. The vendor must usually hand over all the books of accounts, receipts and employee records regarding leave, superannuation, wages and Return to Work records. Usually, the parties agree that the vendor will dismiss employees. The employees may be able to claim redundancy packages from the vendor. These might be substantial, especially if there are employees with long service leave entitlements. A purchaser may choose to re-employ the workers or employ new workers instead. However, if the employees retain continuity of employment with the new owner, the sale price should be adjusted accordingly. The purchaser has no obligation to re-employ the workers, unless this is specified in the sale contract.

The contract will usually state that the stock will be valued on a day before settlement. The vendor and purchaser can either agree on the value or a licensed valuer may be employed. A purchaser should ensure before settlement that they have the relevant price lists to check the valuation. A purchaser is then obliged to pay for the stock at settlement. Accordingly, sufficient funds should be set aside, over and above the purchase price of the goodwill and plant of the business, to pay for the stock. Most contracts specify that the purchaser will also pay stamp duty that is assessed on the value of the business.

If the premises are leased the contract will usually provide that an assignment of the lease is arranged before settlement. If so, both parties should notify the landlord immediately after signing the contract, if not beforehand. A contract should be made conditional upon the assignment being approved. The landlord may reject an assignment to a purchaser on reasonable grounds such as the purchaser's bad credit record, lack of business experience, dishonesty or lack of business references. The lease usually sets out the type of information required by the landlord to assess an application for an assignment.

A purchaser must ensure that an assignment of lease or a new lease is signed by the vendor and the landlord and given to the purchaser at or prior to settlement. The purchaser should also obtain written confirmation from the landlord that the vendor is not in breach of the lease on the date of settlement. If the vendor is, the purchaser becomes responsible for the breaches. A landlord is not obliged to release the vendor from the lease and may demand that the vendor remain liable to the landlord if the purchaser defaults before the end of the original lease. If the purchaser does default, the vendor cannot move back into the premises unless both the purchaser and landlord agree.

Additional requirements for information and the procedure are set out in Part 7 of the Retail and Commercial Leases Act 1995 (SA).

Sometimes the plant of a business may be leased or obtained on hire purchase from a finance company. The contract will usually say that the plant will be assigned to the purchaser. The vendor should advise the finance company as soon as the purchaser agrees to buy so that they can check the purchaser's credit details before approving the assignment of lease. A purchaser should clarify whether the plant is leased with no right of purchase or whether the plant can be purchased after a certain period. Additional information about any plant and equipment that is subject to a security interest and owned by the business or the company that owns the business can be obtained from the Personal Property Securities Register.

Where a business operates using a registered business name the contract will usually state that a transfer of the registered business name must be signed by the vendor and given to the purchaser at settlement. If this clause is not in the contract, the purchaser has no right to use the registered name and the vendor can continue to use the name or sell it to the purchaser or to anyone else.

Under the Land and Business (Sale and Conveyancing) Act 1994 (SA) anyone selling a business for less than $300 000 (exclusive of GST) must give the purchaser a Form 2 [ss 5,7,8,10]. A Form 2 must be given even if the purchaser does not want it. However, a lawyer's certificate that the purchaser has declined a Form 2 after the consequences have been explained will avoid this requirement. A Form 2 states the gross income, purchases and operating expenses from which the net profit of the business for the last twelve months can be calculated. After receiving the Form 2, or from the time the last party executes the sale agreement (whichever is latest), the purchaser has five days to cool off. The maximum deposit that can be asked for is 10% of the purchase price. A purchaser wanting to cool off must give written notice to the vendor or the vendor's agent before the five days elapse. The contract is then rescinded and the deposit must be refunded. If after cooling off the purchaser reconsiders and wants to buy the business it is likely that the person selling the business must serve a new Form 2 and the five day cooling off period starts running again.

The sale contract may provide that after the cooling off period expires a more substantial deposit must be paid. There is then no limit on the amount of the deposit, as long as both parties agree.

The main source of regulation for franchises is the Franchising Code of Conduct, which regulates the conduct of franchisors. The Code is mandatory and commenced on 1 January 2015. It applies to all franchises renewed extended or transferred after that date, as well as new franchises. Further amendments to the Code were made on 1 July 2021, to improve transparency and fairness in the franchising sector. The Code is regulated by the Australian Competition and Consumer Commission. For further detailed information regarding franchises visit the Franchising page on the ACCC website.

A franchise is a system of business developed by the franchisor who is then able to sell the rights to use the system to others, usually for an agreed period. The franchisee may also have to buy or lease the normal aspects of a business, including premises and plant and equipment in addition to entering into the franchise itself.

A prescribed Information Statement must be given to a prospective franchisee before the franchisor gives them other disclosure related documents (see Clause 9 and 9A of the Code). This statement contains a checklist of important steps to consider prior to signing a franchise agreement. This includes learning about franchising, conducting due diligence, obtaining professional advice and considering other options (for example, looking at more than one franchise business).

The prospective franchisee must be given a minimum of 14 days to read all the information that a franchisor provides, including the franchise agreement, disclosure document, key facts sheet and information about any lease arrangement.

By 14 November 2022, franchisors will be required to upload key disclosure information to the Franchise Disclosure Register for prospective franchisees to view. The register will allow prospective franchisees to search, view and compare information and contact a franchisor about opportunities to buy into the franchise.

A franchisee may terminate a new franchise agreement within 14 days after signing the agreement. If the prospective franchisee terminates the agreement, all payments must be refunded (excluding any reasonable expenses already incurred by the franchisor). This is known as the 'cooling off' period. After a franchise agreement is made, a franchisor can only alter or add terms to the agreement that apply retrospectively if the franchisee gives their consent in writing.

Buying a franchise can be expensive. It is important to get legal and accounting advice before entering into a franchise agreement to understand how it works and whether it is going to be profitable. Talk to other franchisees to see how they have managed.

Running a franchise may involve long working hours and take some time before it is profitable. Remember that some of the income goes towards the franchisor for the rights to use the system. A franchisee may also be required to contribute to marketing costs and some legal costs (although these are limited under the Code).

Dealing with Disputes

The Code sets out a regime for dealing with disputes arising out of the franchising agreement. This dispute resolution regime is intended to avoid costly legal proceedings by encouraging mediation.

Ending a franchise

The Code sets out a procedure for early termination by a franchisee, which must be in writing. Most franchises have an end date, but there may be many reasons for early termination. For example, illness or death of an owner or partner, or dissatisfaction with the performance of the franchise. If a franchisee proposes an early termination, the franchisor must respond within 28 days, and give reasons if the request is refused.

If the franchisor wishes to end the agreement early, notice must be given to the franchisee. The franchisor can terminate without notice in certain circumstances, including if the franchisee is bankrupt or is externally administered (liquidation), or abandons the business.