Franchise Agreements Nz
Closing a franchise is a big commitment. It is important that you make this decision while you are in the most enlightened position possible. Before agreeing to purchase a franchise location, you must: There are no mandatory pre-contractual disclosure requirements in New Zealand. However, if a franchisor or primary franchisee is a member of FANZ, each potential franchisee must receive an information document in accordance with the FANZ Code of Conduct at least 14 days before the conclusion of the franchise agreement or framework franchise agreement. If a disclosure document contains false information, the franchisor or primary franchisee will most likely be sued under the Fair Trading Act of 1986. Key elements to proving an allegation of misrepresentation include that the facts are false or misleading, that the potential franchisee relied on those facts, and that the potential franchisee suffered a loss. There are no registration requirements for franchises. All franchise systems must comply with New Zealand laws, so if a particular franchise is in a specific industry such as the medical industry or uses controlled products such as medicines, these deductibles must comply with relevant laws and regulations. Great caution should be exercised instead of assuming that there are no restrictions in New Zealand. If a franchisor belongs to FANZ, the franchise agreement must contain a dispute settlement clause. The Code of Conduct states that mediation is mandatory and has a high chance of success. There is also the Arbitration Act 1996.
A national franchisor that is not a member of FANZ can take legal action, but courts usually require an attempt to resolve the dispute through mediation. A foreign franchisor could initiate proceedings in New Zealand and sue a particular franchisee, but again, courts may require an attempt to resolve disputes through mediation. The applicable law in any franchise agreement is important and most foreign franchisors require that the applicable law be that of their country of origin. At the same time, it is recommended that foreign franchisors stipulate that the applicable law should be the law of New Zealand, as it is much easier to act quickly with respect to a primary franchisee or a defaulting franchisee through the New Zealand courts and to apply New Zealand law. For mobile franchises, the agreement includes conditions that set out signage and other decors required for the vehicles from which the company operates and that may need to be used for all major equipment. If a special vehicle or equipment mounted on the vehicle is required, you may need to purchase the completely abandoned vehicle from the franchisor. Otherwise, you must provide a suitable vehicle yourself. When you buy a franchise, the transaction should be considered in part in the same way as any other business purchase. However, the difference is that the purchase is not an absolute purchase due to the remaining interests and obligations of the franchisor and controls over how you should run the business. If you read the franchise agreement, you`ll likely see or borrow the user manual, which you can read on the side.
This is an essential document for franchisees, as it describes how you can manage your franchise so that it is as successful as the franchisor`s business. It is important that you follow the advice of the franchise manual, as this is the best way to run your business. All intellectual property and the franchise manual must be treated confidentially. The above information is intended to provide context about the franchise agreement and what to expect from it. Keep in mind that while many conditions may seem difficult, they are there to protect the franchise system, not just the franchisor, and that you, as a franchisee, are also protected from the misdeeds of other franchisees. – Allows the franchisor to modify (and very often reduce the size) of the franchise territory in which the respective agreement grants exclusive rights to the franchisee in a defined territory in which other franchisees are not allowed to operate. The agreement must clearly specify the details of what must be paid and when, including the conditions for any deposit to be paid before obtaining the deductible. Actual figures are likely to be determined in the calendar at the end of the document. Non-compete obligations and other restrictive agreements must be included in the relevant franchise agreement to be applied during the term of the contract. The kind of clause I often include is this: with an established franchise, the agreement will probably be in place for some time and the franchisor probably won`t change it beyond a few words here and there just because you or your lawyer don`t like it. However, you should go through it article by article and ask your lawyer to do the same to make sure you understand the provisions it contains. After all, you`ll sign it, not your lawyer.
Events that could result in termination must be specified in the franchise agreement. There must be a fault or tort on the part of the franchisee for a valid termination to be confirmed. In addition, it is common for a franchisor to issue a notice of infringement to a specific franchisee and the time limit for remedying the breach has expired before the termination occurs. If a termination is unlawful, a franchisee could seek relief in court, with the remedies either damages or a court order that the franchise be returned to the franchisee, who can then continue to do business under the franchise agreement. The courts take violations of restrictive agreements very seriously. Whether the franchisor could take over the activities of the franchisee who violates a restrictive agreement depends on the circumstances and the relative importance of the breach. Well-formulated franchise agreements would always allow a franchisor to be incapable. With respect to shareholders of a franchised company, there is generally a restriction that shares cannot be transferred to third parties without the franchisor`s knowledge and consent, and a violation of these is considered an illegal transfer.
Similar provisions apply to leases where a franchisee has leased premises. The consequences of a franchisor or primary franchisee being considered a principal for the actions of its franchisee that have caused harm to another person may result in a claim for those losses and possibly exemplary damages. Franchising in New Zealand is growing very rapidly and becoming more and more sophisticated. It is often said that New Zealand is one of the most deregulated countries in the world, where small and medium-sized enterprises are managed, and the fact that we do not have franchise-specific legislation is also of great help. Most importantly, the duration of the existing franchise is generally not changed and, therefore, the buyer only buys the remainder of the term of the franchise – the period remaining before the expiry of the term – unless the contract provides that the franchisor allows or requires each buyer to enter into a brand new comprehensive contract for a new term. If this is the case, this may apply either to a new full mandate or to the rest of the current mandate. There will also be clauses that specify what happens in the event of termination of the agreement. .