Marketing funds for franchises

Changes to the Franchising Code of Conduct (Code) which took effect on 1 January 2015 altered the obligations for Franchisor’s who operate marketing funds.  Following the changes, Franchisors must, in addition to including details of the fund in the Franchise Agreement:

  • include the details of the marketing fund in the disclosure document;
  • prepare and maintain financial statements concerning the marketing fund;
  • keep all funds received towards the marketing fund in a separate account;
  • make their own contributions towards the marketing fund; and
  • use the marketing fund exclusively for marketing.

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Franchisor’s liability for forecasts

Forecasts are, by nature, attempts to predict the future. In the course of a franchisor-franchisee relationship, and especially so in the period before a franchise agreement is signed, a franchisor will provide forecasts to a prospective franchisee to demonstrate the future value of the franchise. In fact, before a franchise agreement can be signed, the Franchising Code of Conduct (Code) requires that a number of forecasts are given to a prospective franchisee in a disclosure document, in order to help the prospective franchisee to make a reasonably informed decision. [Read more…]

Does a franchise system need to be registered?

People looking to establish a franchise often ask us whether the franchise system needs to be “registered” in Australia. The term franchise system as defined by section 4 of Schedule 1 – Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Code) “includes a business system in which a franchisor grants a franchise to a franchisee”. [Read more…]

Franchisors’ end of term arrangements – valuation of goodwill versus risk of competition

Section 23 of the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth)(Code) provides that a restraint of trade clause in a Franchise Agreement (Agreement) is of no effect, if the Franchisee gives notice of its desire to extend the Agreement and the Franchisor elects not to do so.

A restraint of trade clause can be used in a variety of commercial contracts, however it is generally thought of being more readily enforceable where goodwill is involved.  The Explanatory Statement to Select Legislative Instrument No. 168, 2014 issued by the Minister for Small Business in relation to the Code states clearly that the intention of Clause 23 is to ‘provide relief in special circumstances where a franchisee, through no fault of its own, has not had its franchise extended by a franchisor’. [Read more…]

Changes to the Franchising Code of Conduct 2015

The Australian Competition and Consumer Commission (ACCC) regulate the relationship between franchisors and franchisees through a mandatory code authorised under section 51AE of the Competition and Consumer Act 2010 (Cth). [Read more…]

Changes to the Franchising Code of Conduct

The Commonwealth government has released draft amendments to the Franchising Code of Conduct (Code).  The amendments, which are set to take effect 1 January 2015, will require participants in the franchising industry to rethink their disclosure practices.

[Read more…]

When is your licensee really a franchisee?

Franchise versus distributorship

We are often asked what the difference is between a business operated under licence governed by a distribution agreement and one operated under a franchise agreement.

In short, the franchise relationship is predicated on control and breadth of influence, while a distribution agreement is narrower in scope and does not concern itself with marketing and merchandising. [Read more…]

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

Tel: 07 3221 0013

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