In media release of 7 February 2019, the ACCC announced that café, restaurant and take away food services industries will be the target of the ACCC’s next round of Franchising Code compliance checks.
Ultra Tune’s “stubborn”, “cavalier”, and “serious” breaches of the Franchising Code of Conduct (Franchising Code) and Australian Consumer Law (ACL) have resulted in a total fine of $2.604 million.
“Skimping” on the level of detail in marketing fund or cooperative statements provided to franchisees will not be tolerated.
This article reviews this aspect of the decision handed down by Justice Bromwich.
Last week the Federal Court, in a proceeding brought by the ACCC, imposed a $2,604,000 penalty against Ultra Tune for contravening the Code and the ACL. These were the first proceedings brought against a franchisor alleging a breach of the Franchising Code obligation to act in “good faith” in business dealings with franchisees by the ACCC.
Can you lose your option to purchase or your right to use assets of the franchise granted in a franchise agreement?
A client recently approached MST Lawyers with this very question. The Franchisor had:
(a) an option to purchase the assets of the franchise within six months of the expiry or termination of the franchise agreement; and
(b) a right to use those assets freely within the six months allowed for the exercise of the option.
The Franchisee entered into liquidation, and the liquidator claimed both the option to purchase and the right to use were extinguished under section 267 of the Personal Property Securities Act (PPSA) as they were unregistered security interests.
After conducting a review of Australian, New Zealand and Canadian case law, MST Lawyers concluded that an option to purchase the assets of a business, in the form that was presented by our client, was not capable of forming a security interest. The option to purchase was not extinguished even though it was not registered on the Personal Property Securities Register (PPSR).
However, the conclusion in respect of the right to use was less clear. This article sets out MST Lawyers’ view on the arguments raised by the liquidators and suggests Franchisors consider registering on the PPSR where they may wish to enforce rights to use franchise assets after termination of a franchise.