Posted by Elizabeth Gore-Jones
on 18 January 2024
People often mistakenly enter into a licence agreement or distribution agreement when it is in fact a franchise agreement.
This means that they do not comply with the Franchising Code of Conduct which may lead to large penalties.
If an agreement meets all of the criteria of a franchise agreement, then the Franchising Code of Conduct must be complied with, regardless of whether the agreement is called a franchise, licence, distribution or otherwise.
The criteria for a franchise agreement are as follows:
- A verbal, implied or written agreement;
- One person grants the other the right to operate a business in Australia;
- The business is operated pursuant to a system or marketing plan substantially determined, controlled or even suggested by the franchisor or its associate;
- The business is associated with a trademark, marketing or commercial symbol;
- The franchisee must pay or agree to pay money to the franchisor (subject to some exceptions).
It is important for both parties to understand the nature and consequences of the agreement they have entered.
If you want to learn more, please do not hesitate to contact us.
Author:Elizabeth Gore-JonesAbout: Elizabeth specialises in franchising law. She lectures at Bond University PLA in franchising, she sits on the Queensland Law Society Franchising Committee, she is a past member of the Women in Franchising committee and a past member of the Franchise Council of Australia.
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