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Franchise Disputes:

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Generally speaking, a franchise agreement is a contract in which the owner of a business rants certain rights onto another person to operate the business on the principal’s behalf. The rights will ordinarily concern the operation of the business in the following terms:

  1. Franchisor’s training of the franchisee.
  2. Business support of franchisor to franchisee.
  3. The use of the business name.
  4. The use of the business logo or device.
  5. The use of uniforms by employees
  6. Slogans and representations to be used by employees when interacting with the public or clients.
  7. The manner in which stock and goods are stored and displayed.
  8. The specific goods to be used (i.e. food and other items)
  9. Rotation of stock.
  10. Opening and closing hours.
  11. Dealing with third parties such as suppliers.
  12. Reporting requirements of franchisees to franchisors.
  13. Periodic auditing and monitoring of the franchise agreement.

Other requirements may exist in the terms of the contract, depending on the type of franchise that is being operated. Naturally, disputes between the franchisor and the franchise can occur in relation to each of these above points. The contract itself, the terms and conditions of the franchise, may be in dispute. A claim may have arisen that requires the interpretation or reinterpretation of an express term of the agreement. Alternatively, a claim may be made in relation to an implied term of the franchise contract. For example a dispute relating to a party’s breach of a bona fide may have arisen, or a claim may be made that a party may have acted in breach of the implied duty to act in good faith, fairly and not unconscionably.

A dispute between a franchisee and a franchisor may have arisen in relation to the use of a business name or logo. The terms of the agreement may be ambiguous or unclear in some respect and a franchise lawyer with a specialty in franchise agreements may need to be retained to provide franchise legal advice. The manner in which uniforms are worn, likewise may become an issue in dispute between the parties in a franchise agreement. Whether or not goods and stock are dealt with according to the terms of the agreement, or whether a stipulated supplier is not being used may also be issues in contention. An allegation may be made by the franchisor that the franchisee’s reporting requirements are not being met, or the franchisee may allege that the franchisor is not providing the agreed upon support or training services.

In more complicated matters, a claim may even be made that the purported franchise is not in fact a franchise at all. For example, the degree of control exerted by the franchisor over the conduct of the business may suggest that the relationship is one of employer-employee, agency or even a dependant contractor. The level of independence may suggest a relationship as independent contractor. In complex businesses (such as businesses that provide various types o services) there may be a combination of different relationship types, and from these, different rights and liabilities may arise as between the parties.

In all disputes between franchisors and franchisees, proper franchise law legal advice should be obtained, preferably from a commercial litigator who has experience in business law transactions. The franchise solicitor will be able to consider the facts of the case and apply the relevant legal principles to determine what the rights and liabilities of the parties may be. The franchise lawyer will then be able to advice of the appropriate strategy to employ when dealing with the legal dispute.

If you require assistance with a franchise litigation dispute you may wish to contact our firm by telephone on (02) 9233 4048 or email at info@navado.com.au and make an appointment to speak to one of our solicitors. 

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