AUSTRALIA Trends and Developments Contributed by: Warren Scott, Stewart Levitt, Erik Purcell and Lachlan Speirs, ARCHER SCOTT Lawyers
ARCHER SCOTT Lawyers Level 27, 101 Collins Street Melbourne
VIC 3000 Australia Tel: +61 396 536 463
Email: info@archerscott.com.au Web: www.archerscott.com.au
Franchising in Australia: An Introduction Australia is arguably the most highly regulated envi - ronment in the world in which to conduct a franchised business. This article outlines an Australian trend whereby busi - nesses that would traditionally have utilised a fran- chise model to grow and develop their business are looking to alternative models that give them greater control over their network, and align them better to all stakeholders. History of franchising in Australia In Australia 20 years ago, a franchise agreement could largely contain any terms that the franchisor consid - ered appropriate, provided an explanatory disclosure document was given explaining the relationship and the terms of the agreement. A common theme of the franchisor-franchisee rela - tionship was that the franchisor wanted to make sure that the franchisee was obliged to comply with the franchise system and represent the brand in a man - ner consistent with the franchisor’s brand positioning. Over the past 20 years, successive governments in Australia have heavily regulated the franchising sector on the premise of providing adequate protections for potentially vulnerable franchisees, leading to Australia becoming perhaps the most regulated environment for franchising in the world. Good faith Pursuant to the Franchising Code, each party to a franchise agreement must act towards another party
with good faith, within the meaning of the unwritten law from time to time, in respect of any matter arising under or in relation to: • the franchise agreement; and • the Code. The obligation to act in good faith contained within the Code extends to negotiations and discussions before the parties enter into a franchise agreement. “Good faith” is not defined in the Franchising Code, which provides that “each party to a franchise agree - ment must act towards each other with good faith, within the meaning of the unwritten law”. The “unwrit - ten law” means the law developed in the Australian courts through case law or common law. The High Court of Australia has held that good faith involves “fairness in dealings between contracting parties” ( Commonwealth Bank of Australia v Barker [2014] HCA 32). Similarly, the Federal Court of Australia has held that the obligation to act in good faith means to: “act honestly and with a fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; and an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at time conflict) and to the provisions, aims and purposes of the contract, objectively ascertained” ( Paciocco v
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