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Franchise Law Definition
Franchise law involves advising businesses on the establishment and structuring of franchise arrangements, and on legal issues that typically arise in a franchised business. Franchise lawyers require expertise in a combination of different laws, including intellectual property, competition and fair trading, regulatory, general commercial contracting, and dispute resolution.
In Australia, franchise agreements are regulated by a national "Franchising Code of Conduct," and through a range of State and Federal fair trading laws. The Franchising Code requires franchisors to provide a "Disclosure Document" and associated materials to prospective franchisees, and regulates the conduct of franchisor and franchisee throughout the franchise relationship. It includes rules concerning pre-contractual negotiations, various ongoing disclosure requirements, rules about dispute resolution, and restrictions on the terms of franchise agreements, including the ways in which a franchise agreement can be terminated.
The Franchising Code applies to any licensing arrangement that operates under its definition of "franchise agreement." The three elements are: (a) the licence of a trade mark, (b) the payment of a fee by the licensee, and (c) a requirement that the licensee conducts their business in accordance with a business system or marketing plan substantially determined by the licensor. Care must be taken, as the definition captures many licensing and distribution arrangements that might not consider themselves to be "franchises." There are also certain arrangements deemed to be "franchise agreements," such as a licence to operate a motor vehicle dealership.
A breach of the Franchising Code can result in the government regulator, the ACCC, taking action to impose financial penalties. It also can effect the enforceability of the franchise agreement.
Franchise disputes are quite specialised due to the requirements of the Franchising Code, which includes mandatory mediation of disputes if requested by either party. There is a government-operated referral service which will appoint an accredited mediator with experience in resolving franchise disputes if requested. Franchise disputes most commonly arise where: (a) a franchised business does not perform to the franchisee's expectations, resulting in allegations of misleading conduct or misrepresentations regarding the likely performance of the franchise, (b) a franchisee decides they don't need the franchisor and seeks to leave the system while continuing their business (resulting in enforcement of the franchise agreement by the franchisor), or (c) the franchisor seeks to terminate or not renew the franchise agreement and the franchisee resists.
Many franchise lawyers specialise exclusively in either commercial aspects of franchise law or dispute resolution, but most specialists in this area tend to have expertise in both aspects.
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