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Franchising, Licensing and Distribution | Franchising, Licensing and Distribution

Franchising expertise leads to successful network wind-up

The owner of a franchise network contacted me about winding up their operations after more than 20 years in Australia and New Zealand.

Other lawyers they had approached had raised questions about unconscionable conduct, leaving the owner with no clear direction on how to proceed.

However, when I looked at the franchise agreements, and the basic facts, the solution became clear. While the franchisees had operated for multiple five-year terms, they had not given any notice to formally extend the renewal terms. This meant that, under the Franchising Code, we were able to give each franchisee six months’ termination notice as no renewal option period had been formally exercised.

We immediately went into mediation, which led to 19 out of 20 franchisees settling with the franchisor for value. Bad legal advice saw the final franchisee turn down $500,000 in compensation; only to receive nothing and pay almost the same amount in legal fees in the ensuing Supreme Court action, which found they had no case.

The franchise network has since been wound up – with buybacks funded through cashflow and no borrowings – and its corporate network has grown at a more rapid rate.

A powerful reminder that there is no substitute for looking at the basic facts to achieve great client outcomes.

"The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication."