Most franchisors have been inundated with information regarding the introduction of legislation known as the Unfair Terms Legislation which came into effect on 12 November 2016. The legislation will apply to most franchise agreements (and many other standard form agreements used by franchisors) which are entered into, renewed or amended (with respect to the terms amended) after 12 November 2016 where the counterparty is a "small business".

Now is a good time for franchisors to take a fresh look at the matter by considering the following checklist and whether they are ready for the Unfair Terms Legislation.

  1. Is the franchise agreement "standard form"? Have I considered the ancillary agreements? If the agreements are not standard form, do I have sufficient proof of this?
  2. Are the franchisees in the network "small businesses"? Am I going to treat franchisees differently depending on whether they are "small businesses"?
  3. Are the terms and conditions in my agreements necessary to protect the franchisor's legitimate interests of the franchisors – have I collected sufficient evidence of this?
    1. What terms are most likely to be alleged to be unfair, are those terms important to the franchise?
    2. Are franchisees likely to complain about the term, what would my response to that complaint be?
  4. Does the term requirement amendment or deletion? If the term is necessary to protect the franchisor's legitimate business interests, is there evidence of the nature of those interests?
  5. Has the agreement been drafted in transparent/plain English. Do I need to highlight the franchisor's legitimate interests in this document or in an ancillary document?
  6. Are the relevant people in the franchisor's organisation aware of the Unfair Terms Legislation and its impact with respect to agreements and dealings with franchisees?