What Should I Know Before Running a Franchise Promotion?

Franchisees often look to run a trade promotion to raise brand awareness, promote their goods or services, or launch into a new territory. Have you ever wondered whether a competition might be a useful marketing tool for your franchise business? This article includes a checklist for franchisees running a trade promotion in New South Wales (NSW).

Overview

First, check your Operations Manual and assess whether there are any rules or provisions prohibiting you from running your trade promotion. It is also sensible to get a sign-off from your franchisor. Ask your franchisor whether running a trade promotion will form part of your ‘marketing tools’ and if the franchisor’s marketing fund will help (in whole or in part) to facilitate your competition.

Familiarise yourself with the regulations in your state or territory that govern trade promotions. As a starting point, your trade promotion 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);
• genuinely promoting your goods or services; and
• conducted by a business with an Australian Business Number (ABN) or Australian Company Number (ACN).

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

There are two types of trade promotions. The main difference between the two types of trade promotions is the method of determining the winner.

2. Is an Authority Required to Operate My Trade Promotion in NSW?

You might need to apply to NSW Fair Trading for an ‘authority’ when running certain types of trade promotions. You will not require an authority to operate a game of skill regardless of the: 

• value of the prize pool;
• type of prize awarded; or
• any other factors.

You will need an authority to run a game of chance in NSW if the prize pool value exceeds $10,000. It is possible to apply for a one, three, or five year authority. You will need to pay the relevant fee, which will depend on the length of time that you will hold that authority to run trade promotions.

Once you are an authority holder, you must also submit trade promotion terms and conditions with NSW Fair Trading for each separate competition where the prize is valued over $10,000. You must submit each set of terms and conditions 10 business days before the promotion commences.

Regardless of whether you are running a game of skill or game of chance, your terms and conditions for the trade promotion should comply with any relevant laws, such as the Australian Consumer Law (ACL). 

Franchisees must take care not to engage in conduct that could mislead or deceive competition entrants. If you are running a trade promotion in other states and territories besides NSW, you will need to check their respective trade promotion requirements. The rules in NSW may be different to other states or territories.

3. Does My Competition Have Terms and Conditions?

All trade promotions must have competition terms and conditions to comply with state-based legislation and the ACL. The terms and conditions are a set of rules used to govern the trade promotion. The terms and conditions go a long way in ensuring the promotion operates in a fair and open way. You must comply with your obligations under the terms and conditions. Likewise, all entrants are expected to follow the rules set out.

Before drafting your own terms and conditions, check with the franchisor to determine whether the franchise network has a standard template which you can adapt to suit the needs of your trade promotion. Your franchisor might also be able to help review the terms and conditions. Regardless of whether a template is available to you, a franchise lawyer can offer an experienced view. Your franchise lawyer might draft new terms and conditions or review and amend the template you have altered.

What Should I Include in My Terms and Conditions?

You must make the terms and conditions available to the public from the start of the trade promotion. Terms and conditions can be advertised on your website or available at the place customers enter the draw.

Well drafted terms and conditions should address the following:

• conditions of entry and eligibility factors;
• competition start date and end date, including the time when submitting entries will stop;
• details of any major or minor prizes and their value;
• draw date and method;
• how the winner can claim their prize;
• procedure for notifying the winner and publicising the win;
• what happens if the winner doesn’t claim their prize;
• details of an unclaimed prize draw;
• your name, address and contact number;
• how you plan to resolve disputes arising from the promotion; and
• appropriate disclaimers and limitations of liability.

There are also several items that you cannot award as a prize in a trade promotion lottery, including:

• tobacco and vaping products; 
• cosmetic surgery; 
• weapons; 
• illicit substances; or 
• other illegal items

Key Takeaways

Trade promotions can be an effective marketing tool for your franchise. Before making plans, check the rules set out in your Operations Manual and speak with your Franchisor. Protect yourself and the franchise from liability, penalties and other legal concerns by running a fair trade promotion guided by your tailored terms and conditions. If you have any questions or need assistance applying for a trade promotion permit for your franchise, get in touch with LegalVision’s franchise lawyers on 1300 544 755 or fill out the form below.

Frequently Asked Questions