How Does a Franchise Expand into Australia?

If you are an overseas franchisor looking to exploit the Australian market, there are a number of legal considerations that need to be taken into account. Franchising Law in Australia is some of the most prescriptive franchising law in the world, and there are very serious ramifications for non-compliance. If you want your franchise to expand into Australia, here are some of the issues you should consider:

Registration in Australia

Usually, franchisors will register a new entity in Australia to carry on the franchise business. Alternatively, they may elect to be a registered foreign entity, though this option is less popular given the benefits of limited liability associated with registering a new entity in an untested market. The registration of a new entity requires an Australian director and registered office, amongst other things. From a legal document perspective, a head franchise or similar agreement will need to be entered into entitling the Australian operative entity to carry on the business of franchisor within the Australian market.

Preparation of Franchising Documents compliant with the Franchising Code of Conduct

The two key documents you will need to have prepared are the Franchise Agreement, which are entered into with the individual franchisees, and the disclosure document. The law in Australia is prescriptive as to what (and in some cases, what not) is to be contained in those agreements, so it’s important you get an experienced franchise lawyer to do the job when you plan to expand into Australia.

Intellectual Property Issues

Usually the agreement between the overseas entity and the Australian franchisor will contain a license to exploit the valuable intellectual property of the franchise brand. It’s important that intellectual property is protected, both by way of trademark registration and preservation of copyright. All registrations in this territory should be up to date, and the Franchise Agreement should be carefully drafted to ensure proper protection.

Franchise vs License

Sometimes, an overseas franchise will expand into the Australian market by way of issue of a license or series of licenses, notwithstanding that the carrying out of the license has all the elements of a franchise relationship. Under Australian law, if it looks like a franchise and smells like a franchise, it will be treated like a franchise, including by way of imposition of the strict disclosure obligations. It’s important to obtain advice from your franchise lawyer to ensure you are adopting the correct model.

The franchise lawyers at LegalVision are very experienced in assisting overseas franchisors transition into the Australian market. For an obligation free discussion about the legal documents that would need to be prepared, and how franchising works in the Australian market, please get in touch.