For Franchisees

 

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.

The Full Court of the Federal Court handed down a decision this year that has the potential to affect Business people who might not consider themselves involved in a franchise relationship. The decision also places in doubt the extent to which a Franchisor must go, when undertaking the process of issuing a disclosure document.  We believe that this process must be dictated by the particular circumstances of the

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.

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 Australian Consumer Law has replaced various State and Territory laws from 1 January 2011.  This means that business and consumers throughout Australia are now governed by the same consumer laws.

The ACL is found in Schedule 2 of the Competition and Consumer Act 2010 (Cth) The Trade Practices Act 1974 (Cth) has been repealed and many of its provisions now appear in the Competition and Consumer Act. Some parts of the Competition and Consumer Act mirror the wording of the Trade Practices Act, however there have been significant changes to the provisions of the Trade Practices Act. The numbering of the Act has changed therefore Businesses that use documents that refer to the Trade Practices Act and its various provisions should amend those documents so that they now refer to the correct provision of the Competition and Consumer Act.

Unless you have seen first hand, the way that legal proceedings can be built or destroyed, by a written note relating to a matter in issue, then you cannot appreciate how much lawyers and the court system love bits of paper.  Written notes on  bits of paper can literally determine the outcome of legal proceedings.

The absence of written notes can cause lawyers on both sides of an argument to work for days preparing affidavit material, each trying to recount, with limited success what was said.  In many cases the factual debate is often won by the person with the best supporting paper.

"That contract's not worth the paper its written on".  I understand that this is how people may feel, when they have  taken the time to make a contract, yet a dispute arises anyway.  Nevertheless this statement is rarely true, where a contract is properly drafted.

The point of a contract is to provide the parties to the contract, with a starting point, in case there is a  disagreement.  It is not the case that a White Knight will ride in, to put things right, when the terms of the contract are broken.  If the agreement is properly drafted there will be a good number of matters on which it is more difficult to have an argument.  Yet there will remain scope for an argument and it is up to you to enforce your rights.  You will see below there are things that you can do to make a dispute less likely.

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.