Franchising
Is Your Business Franchise Ready?
Franchising is a particular way of licensing of intellectual property rights. It generally includes the traditional intellectual property rights, as discussed in the licensing chapter above. In addition, it extends to other matter, such as business processes and consistency of branding. Franchises are usually based around a strong brand or trademark, and a proven business system.
The business that owns the franchise system, and receives franchise payments, is called the franchisor. The person or business that buys into and licenses the franchise system, is called the franchisee.
Franchising In Australia
Franchising in Australia is governed by the Franchising Code Of Conduct. And all franchisors and franchisees are obliged to comply with the Code of Conduct.
In Australia, Franchises are governed by the franchising code of conduct. If you are looking to set up a franchise, it is important to ensure that you obtained legal advice by someone qualified and experienced. See for example, the bonus chapter in part three of this book on how to select a patent attorney or trademark agent. Please note that not all patent attorneys or trademark agents will be experienced in franchise law, just as not all lawyers are experienced in franchise law.
The updated Australian Franchising Code of Conduct came into affect on 1 January 2015. http://www.comlaw.gov.au/Details/F2014L01472 – Australia 2015
In Australia, the franchising code of conduct is administered by the ACCC. Their website is www.accc.gov.au
The Code of Conduct imposes strict requirements on the both parties to a franchise, but mainly on the Franchisor. The Code sets out what information must be provided to the Franchisee and the timing of this. Each requirement must be met. There are penalties for failing to meet the requirements of the Code including fines of up to $50 000.
You may not agree with your franchisees to contract out of the franchising code. The franchising code will apply if you enter into, renew, transfer, extend or otherwise vary a franchise agreement after 1 January 2015.
According to the ACCC in Australia (www.accc.gov.au/business/franchising/franchise-agreements),
A franchise agreement is an agreement (written, verbal or implied) under which:
- one party (the franchisor) grants another party (the franchisee) the right to carry on a business supplying goods or services under a specific system or marketing plan substantially determined, controlled or suggested by the franchisor or an associate of the franchisor
- the business is associated with a particular trademark, advertising or a commercial symbol owned, used, licensed or specified by the franchisor or its associate
- the franchisee is required to pay, or agree to pay an amount to the franchisor before starting or continuing the business (there are some exceptions).
Note: A motor vehicle dealership agreement (including a motor boat dealership agreement) is taken to be a franchise agreement even if the above definition has not been met.
Franchising In New Zealand
The New Zealand franchising industry is self-regulating, meaning that there is no legal requirement to abide by any particular code of conduct (unlike Australia). The Franchise Association of New Zealand has both a Code of Practice and a Code of Ethics, that members of that Association agree to adhere to. Copies of these can be found at www.franchiseassociation.org.nz