Franchisees often look to run a trade promotion to raise brand awareness or launch into new a territory.  A trade promotion is free-entry competition and must be:
  • free to enter (you cannot sell entry tickets or require participants to provide anything of ‘intrinsic value’ as a precondition to entering the competition);
  • run to genuinely promote goods and/or services; and
  • run by a business with an Australian Business Number (ABN) or Australian Company Number (ACN).

Before jumping in, you should ensure that there is nothing in your operations manual that regulates or prohibits you from running trade promotions. It’s also sensible to check with the franchisor to determine whether trade promotions fall within the scope of ‘marketing tools’ and whether the franchise’s marketing fund will contribute (in whole or in part) to the competition.

You should also make sure your trade promotion complies with the statutory regime in your state and each state in which the trade promotion will run. We have created a checklist for franchisees running a trade promotion in New South Wales (NSW).

1. What Type of Trade Promotion Do I Want to Run?

There are two types of trade promotions: 

Games of Chance All entrants have an equal chance of winning. The winner is determined by chance (e.g. a random pick generator or via a draw).
Games of Skill The winner submits an entry which is judged against set criteria (e.g. their answer to a question).

2. Have I Secured the Relevant Permit?

In NSW, the Lotteries and Art Union Act 1901 (NSW) and the Lotteries and Art Union Regulations 2014 (NSW) governs games of chance. State-based legislation does not regulate games of skill.

In running a trade promotion (games of skill and games of chance), franchisees must comply with the Australian Consumer Law (ACL). Franchisees must take care not to engage in conduct that could mislead or deceive competition entrants.

In NSW, you don’t need to take out a trade promotion permit when running games of skill, regardless of the value of the prize pool, the type of prize awarded or any other factors. You will be required to take out a trade promotion permit if you run game of chance competitions. Permits are valid for a period of 12 months from the date of issue.

Permit fees vary in NSW and depend on the total prize value of the competition. You will need to complete the prescribed application form and pay the relevant fee at the time of lodgment (set out below). There may be directions in your operations manual about spending allowances for marketing which you should consider before applying for a permit.

 

Prize Pool Amount Application Method Permit Fee
$10,000 or less Online $80
$10,000 or less Hardcopy $138
$200,001 or more Online $2,185
$200,001 or more Hardcopy $2,400

 

All trade promotions must have competition terms and conditions to comply with state-based legislation and the ACL.

3. Does My Competition Have Terms and Conditions?

Terms and conditions ensure compliance with both state-based laws and the ACL. Before drafting your own terms and conditions, check with the franchisor to determine whether the franchise already has a standard set that you can use. If a standard set does exist, a franchise lawyer should still review and tailor the terms and conditions to ensure they set out the rules that will govern your proposed trade promotion. 

What Should I Include In My Terms and Conditions?

Well drafted terms and conditions should address the following:

  • conditions of entry and eligibility factors;
  • competition period;
  • closing date and time for entries;
  • draw date and method;
  • how the winner can claim their prize;
  • what happens if the winner doesn’t claim their prize;
  • procedure for notifying the winner and publicising the win;
  • how prizes can be transferred (if at all) between people; and
  • appropriate disclaimers and limitations of liability.

When running a trade promotion, you cannot award certain prizes such as tobacco, firearms or cosmetic surgery. You must also ensure that the competition is not open to certain people, including:

  • managers,
  • employees (including their immediate family members),
  • directors, or
  • suppliers of the franchise.

There are also publication and notification requirements where the prize value exceeds $500.

Key Takeaways

Trade promotions can be an effective marketing and promotional tool for your franchise. Before getting started, check to ensure that you are allowed to run your proposed competition by reviewing your franchise operations manual and speaking with the franchisor (if required). Protect yourself and the franchise from liability and other legal problems by ensuring that you run the competition in accordance with a set of terms and conditions tailored to your business’ needs. If you have any questions or need assistance applying for a trade promotion permit for your franchise, get in touch with our specialist franchise lawyers on 1300 544 755.

Hanna Daych
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