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Franchise Cases

When A Licence Becomes A Lease

Ireland v Subway Systems Australia Pty Ltd & Anor (Retail Tenancies) [2012] VCAT 1061 (20 July 2012)

The franchisee (Ireland) and the franchisor (Subway) disputed whether a lease or a licence existed between them. Subway held the Head Lease and attempted to grant a licence to the franchisee to use the premises to operate the Subway franchise. This is a very common set up for many franchise systems in Australia.

The parties were referred to as licensee and licensor in the Agreement. The Victorian Civil and Administrative Tribunal (‘VCAT’) reaffirmed the established legal principle that ‘labelling’ an agreement as a licence is …

Implied Term Of Good Faith And Fair Dealing

The plaintiff in Far Horizons Pty Ltd v McDonald’s Australia Ltd [2000] VSC 310 (18 August 2000) operated two McDonald’s restaurants. The franchisee’s relationship with the franchisor deteriorated over a number of years. Correspondence from the franchisor evidenced this and suggested that the franchisor ‘felt uneasy about growing…’ with the franchisee. The franchisor commenced to develop a new store close to the franchisee’s existing restaurant without first offering the site to the franchisee.

The Court acknowledged the decision in Renard Constructions v Minister for Public Works (1992) 26 NSWLR 234 that there exists implied in every franchise agreement a mutual …

Unconscionable Conduct

In ACCC v Simply No-Knead (Franchising) Pty Ltd [2000] FCA 1365, the ACCC applied to the Federal Court under the Trade Practices Act for declarations that the franchisor contravened the Act by:

Refusing to deliver products to some franchisees;

Deleting phone numbers of some franchisees from Telstra Directory without knowledge or authorisation of the franchisees;

Refusing to discuss certain matters of dispute with franchisees;

Omitting some franchisees from its marketing;

Selling products and services in the territories of franchisees; and

Refusing to provide disclosure documentation upon request.

The franchisor was wound up and the ACCC proceeded against a former director. The Court found that the franchisor …

Franchisor Acting In Its Interest At The Expense Of The Franchisee

In Montedeen Pty Ltd v Bamco Villa Pty Ltd [1999] VSCA 59 (18 May 1999), Delta Car and Truck Rental franchisor was found to have breached an implied term of the agreement by directing some of the calls within and around the franchisee’s territory to its own branch located within 200 meters of the franchisee’s territory. The franchisor was unsuccessful in establishing that it had acted in the overall interest of the network, although the Court of Appeal did agree that the franchisor’s conduct was not intended to compete with the franchisee’s business.

Franchisor breaching a contract with franchisees giving …

Misleading And Deceptive Conduct / Delay In Rescission By Franchisee

Anema E Core Pty Ltd v Aromas Pty Ltd [1999] FCA 30 (22 January 1999). A husband and wife purchased a franchised café Aromas in 1995. They claimed successfully that the franchisor misrepresented trading figures prior to their purchase. The Federal Court found that the franchisees discovered the misrepresentation during the first week of trading, but chose not to raise the matter for a year.

As a result of this delay, the Court awarded ‘primary entitlement’ only, which was the difference between the actual purchase price of the business and the value of the business having consideration to the proper …

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