NEW ZEALAND Law and Practice Contributed by: Christopher Young, MinterEllisonRuddWatts
1. An Introduction to Franchising 1.1 Franchise Market Overview Franchising is a very common business model in New Zealand. The Franchising New Zealand 2024 survey conducted by Dr Simon Moore and Prof Jonathan Elms at Mas - sey University identified that in 2024 the franchise sector’s turnover was approximately NZD73.4 billion, including business format franchises, motor vehicle sales and retail of fuel. International franchise brands operating in the New Zealand market include: • McDonald’s; • Domino’s; • Pizza Hut; and • Starbucks. New Zealand-founded franchise brands include: • Green Acres (lawn and garden care); • Rodney Wayne (hair salons); • Stirling Sports (athletic retail); and • Robert Harris (cafes). 1.2 Franchise Regulation New Zealand does not have legislation that spe - cifically regulates the ongoing relationship between franchisors and franchisees. Instead, franchise arrangements are subject to a range of general laws – including those governing contracts, competition, intellectual property (IP), employment, consumer law, privacy and real estate – as well as a voluntary fran - chise code. A key piece of legislation is the Fair Trading Act 1986, which imposes obligations on all traders. It prohib - its unconscionable conduct, misleading or deceptive practices, and making claims that cannot be substan - tiated. While membership in the Franchise Association of New Zealand (FANZ) is voluntary, those who join must adhere to its Code of Practice and Ethics (the “FANZ Code”). This code promotes ethical conduct and best
practice standards in franchising, including require - ments for transparency, dispute resolution and fair dealing. 1.3 Definition of a Franchise Agreement In New Zealand, there is no statutory definition of “franchising”. However, FANZ provides a definition in its Best Practice in Franchising Rules . A “franchise” refers to a method of operating a busi - ness that involves the right to offer, sell, or distribute goods or services in New Zealand, and includes at least the following elements: • the grant by a franchisor to a franchisee of the right to the use of a trade mark, in such a manner that the business carried on by the franchisee is or is capable of being identified by the public as being substantially associated with a trade mark identify - ing, commonly connected with or controlled by the franchisor; and • the requirement that the franchisee conducts the business, or that part of the business subject to the franchise agreement, in accordance with the marketing, business or technical plan or system specified by the franchisor; and • the provision by the franchisor of ongoing market - ing, business or technical assistance during the term of the franchise agreement. While FANZ membership is voluntary and the above definition is not legally binding, it is a useful reference when interpreting what constitutes “franchising” in New Zealand.
2. Franchise Disclosure 2.1 Mandatory Disclosure
New Zealand law does not specifically cover disclo - sure requirements in a franchise context. However, disclosure documents are best practice for ensuring that prospective franchisees are informed about the franchise and their investment, and for mitigating risks of misrepresentation. Franchisors should ensure that all disclosure materials are thorough, accurate and transparent and comply
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