Business Success Through Franchising

While more and more people turn to the idea of running their own business to escape the daily grind of working for at a job, not many people turn their mind to which structure is appropriate for running those businesses. A business’ ability to procure and retain a loyal customer base can mean the difference between success and failure. Because of this, many people are deciding to take the option of becoming franchisees in renowned companies such as Battery World and the Coffee Club. A Franchise Agreement mandates the relationship between the Franchisee and the Franchisor. It is important to understand that a franchise relationship is neither a joint venture nor a partnership between the Franchisee and the Franchisor. Rather, in return for the payment of royalties and other fees to the Franchisor, the Agreement allows the Franchisee to use the registered trademarks and/or other intellectual property of the Franchisor. The Franchise Agreement may also contain dispute resolution provisions and how the Franchisee is to occupy the premises from which the franchising business to be conducted. The Australian Competition and Consumer Commission (ACCC) enforces the Franchising Code of Conduct (the Code) and, thereby, regulates FranchiseAgreements. The Code sets out the laws which govern the permissibility of certain provisions which have been inserted into an Agreement. Furthermore, the Code has introduced compulsory disclosure requirements whichmust be served upon any prospective Franchisee at least fourteen (14) days prior tothe execution of the Agreement.

The Franchisor is required to disclose such matters as:

  •   any existing franchises that they may have; and
  •   their intellectual property and the supply of goods and services which are to be provided to the Franchisee under the Agreement.
Furthermore, the Franchisee is given a seven (7) day cooling-off period from the date which they signed the Agreement. In the event that the Franchisee chooses to exercise their cooling-off rights, the Franchisor must return all monies paid to them, subject to any reasonable expense incurred by the Franchisor to that point. the Franchisor does not have reciprocal rights in this respect. The Competition and Consumer Act (Clth) 2010 (the Act) protects the Franchisee from, among other things, any misleading or deceptive conduct by the Franchisor. In recent news, Caltex Australia announced that it will be buying back all of its franchises throughout the nation at a reported cost of up to $120 million. Being that Caltex is one of Australia’s largest franchise businesses, the buy-back demonstrates that even the largest of companies can restructure their business models from time to time.

Franchising can be a complex area of law, so why not let the friendly and experienced staff at LBC Lawyers assist by providing you with the right advice. We pride ourselves in ensuring that your matter is dealt with efficiently and professionally so that you can concentrate on growing your business.

Aleksandar Cankulovski
Partner
LBC Lawyers
alekslbc@optusnet.com.au

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