Renewing or extending a Franchise – what’s the difference?

A review of the Franchising Code of Conduct  (Code) in regarding the end of term arrangements that apply to ‘renewing’ and ‘extending’ can be somewhat confusing. There are two options for continuing the franchise relationship at the end of the initial term, namely:

  • to renew (Renewed); or
  • to extend (Extended);

the Franchise Agreement.

Whether a Franchise Agreement is capable of being Renewed of Extended:

  • must be disclosed to the Franchisee in the Disclosure Document pursuant to section 18 of the Code; and
  • will have different “end of term arrangements” under the Code.

Renewal

Pursuant to section 4 of the Code, a Franchise Agreement is renewed where, during the initial term, the Franchisee exercises an option to renew it.  In other words, a Renewal is done at the behest of the Franchisee, subject of course to them having an option under the original Franchise Agreement.

Extension

The term of a Franchise Agreement is extended under  section 4 of the Code, where it is extended, other than because of an option exercisable by the Franchisee during the term of the Agreement.  In other words, an Extension is done at the behest of the Franchisor.

Under section 18(2) of the Code, a Franchisor must inform a Franchisee of its intention to Extend the Franchise Agreement, they must give the Franchisee:

  • in the case of a Franchise Agreement for a term of more than six (6) months’, at least six (6) months’ notice; and
  • in the case of a Franchise Agreement for a term of less than six (6) months’, at least one (1) months’ notice.

Further references

Legislation

Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth) Schedule 1 – Franchising Code of Conduct

Related articles by Dundas Lawyers

Managing pre-contractual representations in franchising

Does a franchise system need to be registered?

When is your licensee really a franchisee?

Franchisor’s liability for forecasts

Changes to the Franchising Code of Conduct

Marketing fund for franchises

Further information

If you need assistance with any aspect of franchising, please telephone me for an obligation free and confidential discussion.

Brisbane LawyersMalcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
Telephone: (07) 3221 0013 | Mobile: 0419 726 535
e: mburrows@dundaslawyers.com.au

 

Disclaimer

This article is not legal advice. It is general comment only.  You are instructed not to rely on the commentary unless you have consulted one of our Lawyers to ascertain how the law applies to your particular circumstances.

Dundas Lawyers
Street Address Suite 12, Level 9, 320 Adelaide Street Brisbane QLD 4001

Tel: 07 3221 0013

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