Legal
Issue No. 50 - December/ /
Is your business a franchise in disguise
How many small businesses are franchises in disguise and subject to all the benefits and obligations of the updated Franchise Code of Conduct?
Fiona Gilbert, a Senior Associate and Registered Trade Marks Attorney at Adelaide-based law practice, DLA Phillips Fox, says it is relatively easy for someone
to establish a business without realizing that it is a franchise arrangement.
“This is because the average person expects a franchise arrangement to resemble McDonalds or KFC,” Fiona says.
“However, the definition of a Franchise Agreement under the Australian Franchising Code of Conduct is much broader than this.
“Many arrangements which are labelled ‘licence agreements’, ‘agency agreements’ and ‘distribution agreements’ are in fact Franchise Agreements as defined under the Code.”
Fiona says there are four essential elements which identify a Franchise Agreement:
An agreement (written, oral or implied)
A grant of a right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the Franchisor or an associate of the Franchisor;
Operation of the business substantially or materially associated with a trademark, advertising or commercial symbol that is owned, used, licensed
or specified by the Franchisor (or an associate of the Franchisor);
Payment of an amount by the Franchisee to
the Franchisor.
“These four criteria are very broad and are subject to only limited exceptions,” she says.
“Generally, the second element is the most contentious. However, a practical indicator which should prompt a review of whether a franchise exists is the use of someone else’s trademark.”
Recent public inquiries have focused attention on fairness in franchise systems.
“Both the national and state government enquiries into franchi...
