franchise law Tag

  The Franchising Code of Conduct attempts to enhance Franchisee rights. Franchisees have had enhanced support under the Franchise Code of Conduct since 2015: 1. Franchisors must provide a short information for sheet to intending franchisees which gives an overview of the risks and benefits of Franchising.  The...

 

Even before a buyer obtains legal or accounting advice, a prospective Franchise Buyer should consider our Franchise Purchase Checklist of items.  This will save time and money and ultimately result in a better decision. We have set out some of these checklist items below:

  1. Research - Undertake some research to ensure that you understand the Franchising Industry and how it

Franchise disputes must be resolved in a particular way. Franchisors who are not prepared to be nice, should beware! There are good reasons why a franchisor should listen carefully to their franchisees and make genuine attempts to resolve any  franchise dispute.
A franchise agreement entered into on or after 1 October 1998 must provide for a complaint handling procedure that complies with Part 4 of the franchising code of conduct.
The Franchising Code also obliges both parties to act in good faith.  In order to decide if the parties have acted in good faith a court will look at whether the parties have acted honestly, and for genuine reasons and whether each party has cooperated to try to achieve the objective of the Franchise Agreement.

Riba Business Lawyers

Have you ever wondered whether licensing or franchising is the best model to grow your business?  Many people wanting to avoid the cost and regulation of franchising will consider licensing as an alternative. But is licensing your business model really an alternative to franchising? What is licensing anyway and what is the difference between a franchise and a licence?

Firstly you cannot convert a franchise to a licence simply by changing the name at the top of the document.  The label given to the arrangement has no influence over the legal effect of the arrangement.  Franchising is just a form of licensing.

Whether the relationship that you wish to establish is really a franchise or a licence can be determined only in one way.  The Franchising Code of Conduct defines certain arrangements as a franchise.  The code provides that if certain ingredients are present then a franchise exists.

It is quite common for Franchise Agreements to contain clauses which have a significant effect on the way in which the sale contract should be drafted.  If  a contract for the sale of a Franchised business is signed without first reading the Franchise Agreement and checking any requirements, then it may be difficult to unravel the resulting mess. There is a lengthy list of things that need to be checked.  If  steps are not taken to ensure compliance, then it is likely that any sale contract will be in conflict with the Franchise Agreement.  This problem can be difficult to resolve because the sale contract may oblige the seller to do one thing and the Franchise Agreement may prohibit the doing of that same thing.

There is no such thing as a standard Franchise Agreement.  However there are certain things that all Franchisors will try to control using their agreement.  This need for the Franchisor to maintain control gives all Franchise Agreements a common flavour. There is sometimes a misconception that the Franchise Agreement is designed to protect both Franchisor and Franchisee.   There is however little contained in a Franchise Agreement which is designed to protect a Franchisee and this is often a source of disappointment to the Franchisee once the documents are reviewed.  Franchisees do however enjoy significant protection given at common law, from legislation such as the Franchising Code.

Dealing firstly with whether it is possible to franchise your business.

If your business:

  • was only established in recent years,
  • has not been tested over time in a range of economic conditions,
  • is not a respected and recognizable brand in your local area,
  • does not utilize  operational documentation relating to the processes employed in that business,
  • is not strongly supported by employed managers who are fans of the business,
  • does not utilize a patent or other assets that other potential business owners would value and
  • does not produce a healthy profit after factoring in the franchisors anticipated administration and promotions costs

then you are probably not ready to franchise.

We will ensure that legal fees are not one of the obstacles in the way of your franchise project.  Think of us as partners in the creation of your franchise system. Call and find out how you can franchise your business but delay much of the legal costs of the project.  Do you need a big law firm or a great lawyer with plenty of experience in franchising?  We have been helping business people franchise their businesses since the turn of the millennium.  Hear what some of our clients have to say.  If  you are looking for sophisticated yet down to earth lawyers who are approachable and easy to understand, we would value the chance to help you make your franchise a success.

Section 51 AE of the Competition and Consumer Act (previously the Trade Practices Act) provides for industry codes such as the Franchising Code.

A breach of the Code constitutes a breach of the Competition and Consumer Act. Section 51 AD of the Competition and Consumer Act provides that "a corporation must not, in trade or commerce, contravene an applicable industry code" In a case known as Ketchell's case the court was asked to look at the consequences of a failure to breach the code. The facts of the case put simply are that the franchisor brought an action to recover money that the franchisee said was owning under the franchise agreement.

The Competition and Consumer Act makes "unfair" contract terms void. If a clause is void it cannot be enforced.

Business people should review their standard form contracts regularly to ensure that they are fair. Consumers should be aware that they may not be bound by the terms of any contract that they have entered into if those terms are not fair. In order for the act to make an unfair contract term void, the contract must be a consumer contract and the contract must be  in standard form. A consumer contract is a contract for the supply, to an individual of goods or services or land for  reasons of personal, household or domestic use or consumption. It is hard to be sure what a standard form contract is. It is likely however that any contract which is based on a document prepared in advance of any negotiations, that is little changed as a result of negotiations or the considerations of the particular circumstances are likely to be standard form contracts.