What is the effect of a restraint of trade after termination of a Franchise Agreement?
Adacol was a Raine & Horne franchisee at Brighton and Ramsgate in Sydney.
The franchise agreement provided:
“29.1 - The franchisee and the (guarantors) agree they will not for a period of 12 months after termination (for whatever reason) of this deed, conduct or be in any way employed or interested in any real estate agency business which carries on business substantially within a 5km radius of the premises.”
The franchisor terminated the Franchise Agreement on the basis that Adacol “voluntarily abandoned the franchise business or the franchise relationship” prior to the end of the term.
Adacol continued to operate from the same premises but instead as a Ray White franchisee. It was a condition of the Ray White franchise agreement that franchise fees be waived until the end of the Raine & Horne term.
The Australian Competition and Consumer Commission has instituted proceedings against Sensaslim Australia Pty Ltd (Administrator Appointed) (Sensaslim), Mr Peter Clarence Foster, Mr Peter Leslie O’Brien, Mr Adam Troy Adams and Mr Michael Anthony Boyle.The ACCC alleges that Sensaslim and several of its officers engaged in misleading and deceptive conduct and made false representations in relation to the identity of Sensaslim officers, the Sensaslim Spray and the business opportunities offered by Sensaslim.
The alleged conduct includes:
· Failing to disclose the involvement of Peter Foster in the business of Sensaslim;
· Falsely representing that the Sensaslim Spray was the subject of a large worldwide clinical trial when in fact no such trial was conducted;
· Falsely representing that Dr Capehorn, an obesity specialist, gave unqualified support to the effectiveness of the Sensaslim Spray and the purported clinical trials;
I attended a seminar held by the Franchise Council yesterday. The speakers were Ralph Edwards and Phillip Chapman of Lease 1. A link to their website is http://www.lease1.com.au/contact.html
There were a number of good points made which have caused me to consider the process of negotiating a lease. We suggest that you always obtain legal advice before proceeding to any negotiation. Here are some suggestions:
1. Pressure on a tenant builds as the date for renewal approaches. Tenants are well advised to begin negotiations relating to obtaining new lease at least 12 months before the current lease expires. Institutional landlords are very organized and actively plan how they can get the best deal for their shareholders. Landlords know that without the lease there is no business. As the end date approaches, pressure mounts on the tenant, so that the business is not lost. The tenant has more options while a significant part of the lease term remains and so this is the best time for a tenant to negotiate.
The Federal Court has penalised Allphones Retail Pty Ltd $45,000 for contempt of orders following action by the Australian Competition and Consumer Commission.
Justice Nicholas found that the conduct was both ‘serious’ and ‘deliberate’, having been undertaken by a number of Allphones’ senior personnel.
The orders which Allphones has been found to have breached concerned two undertakings given by Allphones to the court in October 2008.
They prohibited the company from withholding consent to the assignment of an Allphones franchise if the franchisee would not sign a deed releasing Allphones from liability and required Allphones to give the ACCC 7 days’ written notice of its intention to withhold consent to the assignment of an Allphones franchise on the basis that the new franchisee must enter into a new franchise agreement.
“This decision sends a clear message that the ACCC and the Court regard breaches of court orders very seriously,” ACCC Chairman Graeme Samuel said today.