Are you thinking of buying a franchise? It’s an exciting proposition that can bring both rewards and risks. Before you make a commitment, it’s crucial to carefully consider all the elements involved.

Following on from our recent article about misleading or deceptive conduct, we take a look at the case of Lanhai Pty Ltd v 7 Eleven Stores Pty Ltd [2022] VSC 132, which involves allegations of misleading and deceptive conduct about the term of the franchise agreement.

Misleading or deceptive conduct is the most commonly reported complaint by small business to the ACCC. While these complaints will not all relate to franchising issues, misleading or deceptive conduct complaints in franchising are common.

It is a well established principle of Australian law that businesses that illegally exploit their employees can face serious penalties under the Fair Work Act 2009 (Cth) (“Fair Work Act”). It should therefore be unsurprising that franchisees who have engaged in behaviour that illegally disenfranchises their workers can be subject to penalties from the Fair Work Commission.

On 1 April 2022 the Franchising Code of Conduct (the Franchising Code) was amended to insert a new clause 53 which sets out the requirements for the Franchise Disclosure Register.

[What is the Franchising Code?]

The Federal Government has released a discussion paper seeking stakeholder views to help the Government assess the practical benefits of a standalone automotive franchising code and options for mandatory binding arbitration.

The Federal Government has substantially changed the Information Statement to be provided to prospective franchisees as part of the pre-disclosure process. It has also clarified that the Information Statement must be given before the other documents given to a prospective franchisee (14 days before a prospective franchisee enters into a franchise agreement).

The Franchising Code of Conduct (the Franchising Code) was amended on 1 June 2021, with most amendments applying from 1 July 2021, including the Exit and Termination amendments.

A restraint of trade clause is a clause which is included in an agreement typically to stop someone from competing or using confidential information.