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Assume firstly that the hypothetical Franchise System is a properly run Franchise System. Of course this is not always the case. In this hypothetical system, what then are the primary risks to success? It should be expected that the reasons for failure in small business are in many cases the same as the reasons for failure of a Franchisee within a franchise system. The failure rate for franchised businesses  is perhaps less than for private small business as a whole because while some applicants would not be accepted by any competent franchisor, there is no restriction on any punter starting a business. It must be accepted that some people are not suited to owning a business. What however are the most common reasons for failure within a franchise system. I recently followed a panel of advisors who considered these to be the primary causes of failure:

Raine & Horne Pty Ltd –v- Adacol Pty Ltd [2006] NSWSC 36

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.

The implementation of the new Personal Property Securities Register (PPSR) will affect most Business across Australia. Business owners and individuals who take security interests over personal property will need to understand the new system and how it differs from the existing registries. We will run through the some of the terminology and benefits of the new Register as well as provide some helpful information about ensuring your security interests are protected. In the same way that you can lose your interest in a house if you do not register that interest on the title. You can also lose your interest in any personal property in which you have taken an interest if it is not registered. If you operate a business where you retain title to goods until you receive payment then these changes have a particular impact on you.