NEW ZEALAND Law and Practice Contributed by: Christopher Young, MinterEllisonRuddWatts
Franchisors should ensure that all disclosure materials are thorough, accurate and transparent, and comply with New Zealand’s general laws on commercial con - tracting and dealings, including the Fair Trading Act 1986. This Act prohibits unconscionable conduct in trade, misleading or deceptive conduct (which may include omissions), and unsubstantiated representa - tions. Of relevance to the franchise sector is Section 22 of the Fair Trading Act 1986, stipulating the fol - lowing. • No person shall make a representation that is false or misleading in a material particular concerning the profitability or risk or any other material aspect of any business activity that that person represents as one that can be, or can be to a substantial extent, carried on at or from a person’s place of residence. • No person who invites, whether by advertisement or otherwise, persons to engage or participate, or to offer or apply to engage or participate, in a business activity requiring the performance by the persons concerned of work, or the investment of money by the persons concerned and the perfor - mance by them of work associated with the invest - ment, shall make, with respect to the profitability or risk or any other material aspect of the business activity, a representation that is false or misleading in a material particular. Franchisors must ensure that all material information disclosed is accurate. If the franchisor is a member of FANZ, mandatory disclosure obligations apply under the FANZ Code. Disclosure must follow the FANZ Code, which con - tains a list of required disclosure document contents, including the following. • Franchisor details. • A resume of the business experience of the fran - chisor and key directors/executives/managers. • A current franchisor solvency certificate (the con - tents of which are prescribed in the FANZ Code). • Details of any bankruptcies, receiverships, liquida - tions, etc, of the franchisor or its directors/execu - tive officers/principals from the past five years.
• A summary of the main particulars and features of the franchise, including: (a) the nature and period of existence of the fran - chise system and how it has developed; (b) examples of any relevant registered trade marks, logo, symbol or other relevant forms of IP used to market or promote any form of IP of the franchisor’s goods or services, and steps taken to protect these – if IP is licensed to the member, there must be a brief explanation of the member’s right to use the IP and ownership by related/associated companies, and details of any threatened or pending litigation in rela - tion to these; (c) details of initial and ongoing payments to be made by the franchisee to the franchisor (in - cluding the method of calculation if applicable, and the amount to be refunded by the fran- chisor if the franchisee terminates the franchise agreement within the cooling-off period); (d) particulars of any restrictions imposed on the franchisee (eg, territorial, or the offer of com - peting franchises); (e) a summary of the terms and conditions for the purchase of services, goods, fixtures, property, etc, from the franchisor and the situation ap - plying if the source of goods/products supplied by the franchisor fails, plus relevant comments/ conditions with respect to rebates, etc, from suppliers (at a minimum disclosing whether the franchisor is entitled to receive rebates or fi - nancial benefit from suppliers, and whether any rebate or financial benefit is shared, directly or indirectly, with franchisees); (f) the basis of the franchisor’s involvement/ap - proval in the selection of the site of any fran - chisee business premises (where applicable); (g) a summary of the terms and conditions relating to termination, renewal, goodwill, and assign - ment of the franchise; and (h) a summary of the main obligations of the fran - chisor (including initial and ongoing training to be provided). • A list of components making up the franchise purchase. • Details of financial requirements of franchisees.
51 FRANCHISING 2026
C HAMBERS.COM
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