Franchisors

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…]

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