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.
The cost of preparing legal documentation to turn a business into a franchised system is between $8000 and $20,000 plus GST . This cost may be recovered by the sale of franchises. Once the template documents are prepared the franchisee should pay the franchisor's costs to prepare and issue the documents, as well as the cost of negotiations. We set up franchise systems for clients throughout Australia. Please contact us for an instant quote. The task of preparing this documentation is a routine legal engagement for us however it is a lengthy process where each step in the process must be respected. We can usually provide draft franchise documentation within 2 weeks of receiving instructions.The cost and time involved is determined by the complexity of the system, and the extent to which the client has resolved issues relating to the workings of the system. For example if the franchise system relates to a home or vehicle based system, then the cost is generally not much more than $8000 plus GST. When it is necessary to incorporate procedures relating to retail shop leasing then this would normally add another level of processes and cause cost increases.
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;
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.