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When is a Renewal of a Franchise not a Renewal?

Posted on 20 August 2014

In the case of Civic Video Pty Limited v Yogies Pty Limited [2011] NSWSC 1107 it was held that, in certain circumstances the variations to a “renewal” agreement may be so great that the agreement may be a new agreement rather than a renewal. 

That was held not to be the case here.  The old agreement and the new agreement were found to be on similar terms concerning the same franchise and the same products and imposing similar obligations on both the Franchisee and the franchisor.  The new agreement varied the fees payable by the Franchisee and modified some of the Franchisee’s obligations however the changes were not sufficient to mean the agreement was not a renewal of the old agreement.

Civic Video did not comply with the Franchising Code of Conduct by obtaining a written statement from the Franchisee that it had received, read and had a reasonable opportunity to understand the disclosure document and the Code.  However, on the Judge’s finding the Franchisee had received a copy of the disclosure document and the Code and the Franchisee had read them.  The Franchisee had over 2 months to consider the documents before they took effect and there was no suggestion the Franchisee did not understand the documents.  It was held that it appeared the only reason the Franchisee did not provide the statement required by the Code was because the Franchisee was seeking to use the Code to achieve a holding over period even though Civic Video made it clear they would not accept that. 

The Franchisee had obviously received previous disclosure documents from Civic Video and the Franchisee was obviously familiar with the risks of the franchise and in these circumstances the court held that the Franchisee should not be granted relief in respect to Civic Video’s failure to comply with clause 11(1) of the Code.

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