Managing pre-contractual representations in franchising

The activities of franchisors and franchisees are strongly regulated by Franchising Code of Conduct.  However, the recent decision in Guirguis Pty Ltd & Ors v Michel’s Patisserie System Pty Ltd & Ors [2016] QDC 117 (Guirguis case) serves as a reminder of why franchisors should also take care in managing their pre-contractual representations to potential franchisees. [Read more…]

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. [Read more…]

2016 Events

18 August 2016 – Franchising demystified – the legals explained

Attendees were introduced to the legal elements of a franchise system including: [Read more…]

What is a Franchise Agreement?

A franchise agreement (Franchise Agreement) is defined in clause 5(1) of the Franchising Code of Conduct (Code), located in Schedule 1 of the Competition and Consumer (Industry Codes–Franchising) Regulation 2014 – as:

  • a written, oral or implied agreement;
  • in which a person (Franchisor) grants to another person (Franchisee) the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the Franchisor; and
  • under which the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol that is owned, used, licensed or specified by the Franchisor or an associate of the franchisor; and
  • under which, before starting or continuing the business, the Franchisee must pay or agree to pay to the Franchisor or their associate an amount; for example, an initial capital investment fee or a payment for goods or services.

[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…]

Dundas Lawyers
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Tel: 07 3221 0013

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