{"id":149966,"date":"2026-10-07T11:19:56","date_gmt":"2026-10-07T11:19:56","guid":{"rendered":"https:\/\/www.legal500.com\/guides\/?post_type=comparative_guide&#038;p=149966"},"modified":"2026-10-08T12:45:25","modified_gmt":"2026-10-08T12:45:25","slug":"new-zealand-franchise-licensing","status":"publish","type":"comparative_guide","link":"https:\/\/www.legal500.com\/guides\/chapter\/new-zealand-franchise-licensing\/","title":{"rendered":"New Zealand: Franchise &amp; Licensing"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-149966","comparative_guide","type-comparative_guide","status-publish","hentry","guides-franchise-licensing","jurisdictions-new-zealand"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">MinterEllisonRuddWatts<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/www.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2024\/10\/MERW-logo-2.png\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">MinterEllisonRuddWatts<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/www.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2024\/10\/MERW-logo-2.png\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Franchise &amp; Licensing laws and regulations applicable in New Zealand<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a legal definition of a franchise and, if so, what is it?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Although franchising is a very common business model in New Zealand, \u201cfranchise\u201d is not defined by statute. Although not definitive, the New Zealand Courts have considered that a starting point is that a franchise is a &#8220;contractual licence&#8221; with certain defining features.<\/p>\n<p>The Franchise Association of New Zealand (<strong>FANZ<\/strong>) Best Practice in Franchising Constitution defines a \u201cFranchise\u201d as the method of conducting business under which the right to engage in the offering, selling or distributing of goods or services within New Zealand includes or is subject to at least the following features:<\/p>\n<ul>\n<li>the grant by a Franchisor to a Franchisee of the right to the use of a Mark, in such a manner that the business carried on by the Franchisee is or is capable of being identified by the public as being substantially associated with a Mark identifying, commonly connected with or controlled by the Franchisor; and<\/li>\n<li>the requirement that the Franchisee conducts the business, or that part of the business subject to the Franchise Agreement, in accordance with the marketing, business or technical plan or system specified by the Franchisor; and<\/li>\n<li>the provision by the Franchisor of ongoing marketing, business or technical assistance during the term of the Franchise Agreement.<\/li>\n<\/ul>\n<p>Membership of FANZ is not compulsory so this definition is not determinative in New Zealand but may guide interpretation of the definition of \u201cfranchise\u201d.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any structuring considerations for foreign franchisors (e.g. use of master franchisees, local presence requirements)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no legal requirement for a foreign franchisor to have a local presence in New Zealand in order to grant franchises. Foreign franchisors may operate through a variety of structures, including:<\/p>\n<ul>\n<li>Direct franchising ie the foreign franchisor grants franchise agreements directly to New Zealand franchisees. The franchisor must ensure it complies with all applicable New Zealand laws, including the Fair Trading Act 1986 (which prohibits misleading and deceptive conduct and unfair contract terms), the Contract and Commercial Law Act 2017, and relevant competition, IP, employment, and tax laws.<\/li>\n<li>Master franchise \/ sub-franchise structure: the foreign franchisor may grant a master franchise to a New Zealand based master franchisee, who then sub-franchises to individual franchisees. This structure is well recognised under the FANZ Code of Practice and Ethics (<strong>FANZ Code<\/strong>). It can reduce the operational burden on the foreign franchisor and provides a local point of contact and compliance oversight. The FANZ Code requires that where a franchisor and a master franchisee\/sub-franchisor both enter into a contractual arrangement with a franchisee, the Disclosure Document contain material information in relation to both parties, including financial disclosure relating to both.<\/li>\n<\/ul>\n<p>If a New Zealand company (including a subsidiary) is incorporated it must have at least one director who either lives in New Zealand, or lives in Australia and is a director of a company registered in Australia.<\/p>\n<p>Overseas companies carrying on business in New Zealand must register with the New Zealand Companies Office.<\/p>\n<p>A foreign company can establish a branch in New Zealand by registering on the overseas register under the Companies Act 1993. There is no resident director requirement but there must be one or more persons resident or incorporated in New Zealand who are authorised to accept service in New Zealand of documents on behalf of the overseas company.<\/p>\n<p>Other factors which may impact include tax and competition law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any requirements that must be met prior to the offer and\/or sale of a franchise? If so, please describe and include any potential consequences for failing to comply.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no statutory requirements under New Zealand law. As with any business, the buyer should make its own enquiries and obtain financial and legal advice. The franchisor should ensure it complies with New Zealand\u2019s general commercial and contract laws including the Fair Trading Act\u00a01986 which prohibits (amongst other things) misleading and deceptive conduct and unsubstantiated representations.<\/p>\n<p>If the franchisor is a member of FANZ (membership is not compulsory), then the FANZ Code will apply. Pursuant to the FANZ Code, before execution of any franchise agreement franchisors will require the franchisee to:<\/p>\n<ul>\n<li>certify it has received and read the Disclosure Document and the FANZ Code<\/li>\n<li>either:\n<ul>\n<li>produce a certificate from a solicitor certifying that the solicitor is acting independently for the franchisee and has explained the franchise agreement (and preliminary agreement if there is one) to the franchisee, and franchisors may require a certificate from an accountant certifying that the accountant is acting independently for the franchisee and has explained the accounting and financial aspects of the franchised business opportunity under the franchise agreement to the franchisee; or<\/li>\n<li>sign a statement that the franchise agreement has been explained by a solicitor or that the franchisee declined to take independent legal advice, and franchisors may also require the franchisee to sign a statement that the accounting and\/or financial aspects of the franchised business have been explained to the franchisee by a qualified professional or that the franchisee has been advised to take independent accounting and\/or financial advice from a qualified professional and has declined to take that independent advice.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any registration requirements for franchisors and\/or franchisees? If so, please describe them and include any potential consequences for failing to comply. Is there an obligation to update existing registrations?  If so, please describe.  Are there any practical or timing implications (e.g. typical registration timelines, delays in practice)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no specific registration requirements for franchisors and\/or franchisees.<\/p>\n<p>If the franchisors and\/or franchisees are New Zealand companies, there will be requirements including the filing of annual returns and constitution of boards of directors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any disclosure requirements (franchise specific or in general)? If so, please describe them (i.e. when and how must disclosure be made (is there a minimum disclosure period before signing or payment (e.g. cooling-off period)), is there a prescribed format, must it be in the local language, do they apply to sales to sub-franchisees) and include any potential consequences for failing to comply.   Is there an obligation to update and\/or repeat disclosure (for example in the event that the parties enter into an amendment to the franchise agreement or on renewal)? What are the consequences of late or incomplete disclosure?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no franchise specific disclosure requirements under New Zealand law, although there are if the franchisor is a member of FANZ \u2013 see detail below.<\/p>\n<p>Where disclosure is made, the franchisor should ensure it complies with:<\/p>\n<ul>\n<li>New Zealand\u2019s general commercial and contract laws including the Fair Trading Act 1986 which prohibits unconscionable conduct in trade, misleading and deceptive conduct (which can also arise through omissions of disclosure) and unsubstantiated representations. For example, s22 of the Fair Trading Act 1986 that:<\/li>\n<\/ul>\n<p>\u201c(1) No person shall make a representation that is false or misleading in a material particular concerning the profitability or risk or any other material aspect of any business activity that that person represents as one that can be, or can be to a substantial extent, carried on at or from a person&#8217;s place of residence.<\/p>\n<p>(2) No person who invites, whether by advertisement or otherwise, persons to engage or participate, or to offer or apply to engage or participate, in a business activity requiring:<\/p>\n<p>(a) The performance by the persons concerned of work; or<\/p>\n<p>(b)The investment of money by the persons concerned and the performance by them of work associated with the investment<\/p>\n<p>shall make, with respect to the profitability or risk or any other material aspect of the business activity, a representation that is false or misleading in a material particular\u201d.<\/p>\n<ul>\n<li>laws applicable to the relevant goods\/services provided by the franchise as there may be disclosure requirements applicable to certain industries.<\/li>\n<\/ul>\n<p>A franchisor must ensure all important information is disclosed, has been substantiated, and is not inaccurate or misleading.<\/p>\n<p>If the franchisor is a member of FANZ, then disclosure must be made to franchisees and potential franchisees in accordance with the FANZ Code:<\/p>\n<ul>\n<li>the Code of Practice and Ethics requires the franchisor to have a Disclosure Document<\/li>\n<li>the contents of the Disclosure Document are prescribed in the Code and include details on the franchisor, a franchisor solvency certificate and a summary of the main particulars and features of the franchise business<\/li>\n<li>the Disclosure Document must be updated at least annually and be provided to all prospective franchisees at least fourteen (14) days prior to signing a franchise agreement (or, if preceded by the signing of a preliminary agreement, fourteen (14) days before the prospective franchisee becomes bound by the preliminary agreement to proceed)<\/li>\n<li>a Disclosure Document is required to be provided to an existing franchisee in conjunction with the renewal of the franchise agreement within one month of being requested by the franchisee<\/li>\n<li>the financial disclosure contained within the Disclosure Document shall be updated on an annual basis and shall be provided to any existing franchisee at any time upon request by the franchisee.<\/li>\n<li>in addition to the Disclosure Document requirements, every franchise agreement granted by a FANZ member must contain a &#8220;cooling off&#8221; provision giving the franchisee a period of not less than seven (7) days from the date of entry into the franchise agreement (or preliminary agreement) during which the franchisee may by formal notice elect to withdraw from the agreement. If a franchisee withdraws during the cooling-off period, they are not bound by the agreement (except confidentiality and IP protection provisions), are not obliged to pay any further monies, and are entitled to be promptly refunded all monies already paid except for certain reasonable expenses clearly specified in the agreement and\/or Disclosure Document. This cooling-off requirement does not apply to renewals, extensions, or grants to a transferee or assignee of a franchise.<\/li>\n<li>Where a franchisor and a master franchisee\/sub-franchisor both enter into a contract with the franchisee, the Disclosure Document will contain information and financial disclosure in relation to both the master franchisee and sub-franchisor.<\/li>\n<li>Where the franchisor is not in a direct contractual relationship with the franchisee and the franchise is granted by the master franchisee\/sub-franchisor the Disclosure Document must disclose the implications for the Franchise Agreement if the master franchisee\/sub-franchisor\u2019s agreement with the franchisor be terminated.<\/li>\n<li>the Disclosure Document may be provided electronically. The franchisor should check that the recipient is willing to receive the documents electronically or offer to provide a hard copy on request.<\/li>\n<\/ul>\n<p>There are no statutory penalties for non-compliance with FANZ disclosure requirements, as New Zealand has no franchise specific disclosure legislation. However, non-compliance by a FANZ member with the FANZ Code&#8217;s disclosure requirements may result in a complaint being lodged with FANZ. Under the FANZ Code&#8217;s Complaints Process, the FANZ Board may impose sanctions on a non-compliant member including written censure (confidential), suspension or removal from membership, a direction to undertake remedial action, a written apology to the complainant, and recovery of FANZ\u2019s reasonable costs.<\/p>\n<p>In addition, inadequate or misleading disclosure may give rise to claims under the Fair Trading Act 1986 (misleading and deceptive conduct, unsubstantiated representations) and\/or the Contract and Commercial Law Act 2017 (misrepresentation), with remedies including damages and cancellation of the franchise agreement.<\/p>\n<p>There may be additional disclosure requirements if, for example, franchisors or franchisees have a primary listing in New Zealand, as such entities have primary continuous disclosure obligations to the stock exchange in respect of material information.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">If the franchisee intends to use a special purpose vehicle (SPV) to operate each franchised outlet, is it sufficient to make disclosure to the SPVs' parent company or must disclosure be made to each individual SPV franchisee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>New Zealand law does not specify disclosure requirements for franchising.<\/p>\n<p>For FANZ members, the FANZ Code requires that:<\/p>\n<ul>\n<li>where a franchisor and a master franchisee\/sub-franchisor both enter into a contractual arrangement with a franchisee, the disclosure document will contain material information in relation to both the franchisor and master franchisee\/sub-franchisor including financial disclosure relating to both the franchisor and the master franchisee\/sub-franchisor.<\/li>\n<li>where the franchisor is not in a direct contractual arrangement with the franchisee and the franchise is granted only by the master franchisee\/sub-franchisor then the disclosure document must fully disclose the implications for the franchise agreement should the master franchisee\/sub franchisor&#8217;s agreement with the franchisor be terminated.<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What actions can a franchisee take in the event of mis-selling by the franchisor?  What are the main legal grounds for such claims (e.g. misrepresentation, statutory disclosure breaches, unfair commercial practices)?  To what extent can liability be excluded or limited by non-reliance or entire agreement clauses or disclaimers in the franchise agreement, disclosure document or sales material?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The remedies that may be available to a franchisee in this scenario are, if not expressly provided for in the franchise agreement, governed by the Contract and Commercial Law Act 2017 (<strong>CCLA<\/strong>).\u00a0 The CCLA provides that:<\/p>\n<ul>\n<li>where a party to a contract (say, a franchisee) has been induced to enter into the contract by a misrepresentation, whether innocent or fraudulent, made to them by or on behalf of another party to that contract (say a franchisor), the franchisee would be entitled to damages from the franchisor in the same manner and to the same extent as if the representation were a term of the contract that has been breached and the franchisee is not, in the case of a fraudulent misrepresentation, or of an innocent misrepresentation made negligently, entitled to damages from the franchisor for deceit or negligence in respect of the misrepresentation;<\/li>\n<li>a right to cancel the contract for misrepresentation may arise if the party has been induced to enter into it by a misrepresentation (whether innocent or fraudulent) made by or on behalf of another party to the contract and:\n<ul>\n<li>the parties have expressly or impliedly agreed that the truth of the representation is essential to the cancelling party; or<\/li>\n<li>the effect of the misrepresentation will be to substantially reduce the benefit of the contract to the cancelling party or substantially increase the burden to the cancelling party under the contract; and<\/li>\n<\/ul>\n<\/li>\n<li>a court may make an order(s) granting relief where a contract is cancelled, including damages.<\/li>\n<\/ul>\n<p>However, if the franchise agreement provides a remedy for misrepresentation, the provisions of the CCLA apply subject to the provisions in the agreement.<\/p>\n<p>In addition, a franchisee could consider taking action pursuant to the Fair Trading Act\u00a01986 (<strong>FTA<\/strong>) on the basis that the franchisor has acted in breach of its obligations e.g. by engaging in unconscionable conduct, or misleading and deceptive conduct.<\/p>\n<p>It is possible to contract out of some or all of the above remedies.\u00a0 Including a disclaimer, or exclusion clause, in the franchise agreement or other sales material may further limit the availability of the remedies referred to above.\u00a0 The effect of a disclaimer will depend on whether it is a term of the franchise agreement, and whether notice of it was given before or at the time the contract was entered into.\u00a0 However, it is not generally possible to exclude or contract out of liability under the FTA, subject to an exception where both parties are \u201cin trade\u201d, the agreement is in writing, and it is fair and reasonable in the circumstances for the parties to be bound by provisions excluding liability for misleading or deceptive conduct, false or misleading representations, or unsubstantiated representations.<\/p>\n<p>Exclusion clauses are interpreted by the courts strictly; if there is any ambiguity, that ambiguity will ordinarily be resolved against the party seeking to rely on the clause, and exclusion clauses which attempt to exclude fraudulent misrepresentation are always unenforceable.<\/p>\n<p>Given exclusion clauses will not always be effective to limit liability, franchisors should take care to provide fulsome and accurate disclosure and sales material to prospective franchisees.<\/p>\n<p>Note also that it is a requirement on members of the Franchise Association of New Zealand (<strong>FANZ<\/strong>) to ensure that franchise agreements contain a \u201ccooling off\u201d provision where new franchisees have at least a 7 day period from the date of entry into a franchise (or preliminary) agreement during which the franchisee can reconsider their decision to enter the franchise and withdraw from the agreement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Would it be legal to issue a franchise agreement on a non-negotiable, \"take it or leave it\", basis?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Although franchise agreements can be issued on a non-negotiable, &#8220;take it or leave it&#8221; basis, care should be taken to assess the terms. New Zealand\u2019s Fair Trading Act 1986 provides that \u201cunfair contract terms\u201d are prohibited in small business to business contracts \u2013 these are defined as standard form contracts (ie those that are non-negotiable or on a \u201ctake it or leave it\u201d basis) and where the trading relationship is not expected to exceed an annual value of NZ$250,000 (including GST) at the time the relationship is formed.<\/p>\n<p>Franchise agreements are typically strongly in favour of the franchisor so care should be taken to ensure a franchise agreement is compliant with New Zealand law, particularly where the franchise agreement is a standard form used across multiple jurisdictions. In our experience the New Zealand law around unfair contract terms can be quite different to other jurisdictions.<\/p>\n<p>A Court may declare a term to be unfair if it meets all three of the following requirements.<\/p>\n<ul>\n<li>would cause a significant imbalance in the parties\u2019 rights and obligations arising under the contract;<\/li>\n<li>is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by it; and<\/li>\n<li>would cause detriment (whether financial or otherwise) to a party if it were applied, enforced or relied on.<\/li>\n<\/ul>\n<p>In making this determination, the Court may consider any matter it thinks relevant, but must take into account the contract as a whole and the extent to which the term is transparent. The Fair Trading Act also includes a list of examples of terms that may be unfair terms. These examples primarily involve allowing one party to do something and not the other party \u2013 i.e. avoiding\/ limiting performance, terminating the contract, varying the terms or penalty clauses. Some \u201cexempt terms\u201d cannot be declared unfair. These are terms that define the main subject matter of the contract or sets the upfront price payable under the contract.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are trademarks, know-how, trade secrets and copyright protected in your country?  Are there any specific requirements or risks relating to the licensing of know-how and trade secrets in a franchise context?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Generally trade marks for franchises should be registered. A core attribute of franchises is the licensing of the trade mark so this is often an expectation of franchisees, and from the franchisor\u2019s perspective gives the franchisor stronger rights if franchisees misappropriate branding in future.<\/p>\n<p>New Zealand protects registered trade marks under the Trade Marks Act 2002, and unregistered trade marks under the Fair Trading Act 1986 and through the tort of passing off. The Madrid Protocol is in force in New Zealand and international registrations filed through WIPO can designate New Zealand.<\/p>\n<p>In New Zealand, generally, the first person to use a trade mark or, in the absence of use or reputation in New Zealand, the first person to file an application to register the mark, is entitled to be registered as the owner of that trade mark. Applications\/registrations can be challenged if a third party has sufficient reputation in New Zealand.<\/p>\n<p>Franchise businesses expanding into New Zealand should check the ability to use a trade mark in New Zealand without infringing third party rights and register trade marks. The franchise agreement should clearly cover ownership of the trade marks in New Zealand. In New Zealand licensed use of a trade mark should be authorised by the registered proprietor of the trade marks to help maintain the validity of the registered trade marks.<\/p>\n<p>Know-how and trade secrets are typically protected by confidentiality and other contractual arrangements. In a franchise context know-how about the franchise is typically recorded in a franchise operation manual. In New Zealand copyright will generally subsist in the manual.<\/p>\n<p>Know-how and trade secrets are typically protected through contractual provisions including:<\/p>\n<ul>\n<li>confidentiality obligations;<\/li>\n<li>an obligation on the franchisee to return or destroy all confidential materials on expiry or termination of the franchise agreement;<\/li>\n<li>restraints on post term use and disclosure of confidential information; and<\/li>\n<li>express acknowledgement by the franchisee of the franchisor&#8217;s ownership of, and exclusive rights in, all know-how, trade secrets, and confidential information disclosed during the franchise relationship.<\/li>\n<\/ul>\n<p>New Zealand law also recognises breach of confidence, generally in circumstances where (i) the information must have the necessary quality of confidence (ii) the information was imparted in circumstances importing an obligation of confidence and (iii) there has been an unauthorised use of that information to the detriment of the party communicating it.<\/p>\n<p>Copyright subsists automatically and New Zealand does not have a copyright registration regime. Copyright can also be used to protect industrial designs in New Zealand that may not be protected in other countries (with a term of protection limited to 16 years). Protection drives off the underlying drawings and designs for products, or in some cases longer protection (of 25 years) is available where the product itself is a work of \u201cartistic craftsmanship\u201d. New Zealand recently entered into Free Trade Agreements with the EU (<strong>EU FTA<\/strong>), and the United Kingdom under which New Zealand agreed to extend the term of copyright protection to 70 years after the death of the author \u2013 this change will be made within four years of the EU FTA coming into force on 1 May 2024.<\/p>\n<p>There are no specific requirements relating to the licensing of know-how and trade secrets in a franchise context under New Zealand law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any franchise specific laws governing the ongoing relationship between franchisor and franchisee? If so, please describe them, including any terms that are required to be included within the franchise agreement.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no franchise specific laws that govern the ongoing relationship between franchisor and franchisee. The parties need to comply with various New Zealand laws that will apply to franchise agreements, including contract, intellectual property, real estate and competition. In addition, the Fair Trading Act\u00a01986 contains a range of requirements on traders including prohibiting unconscionable conduct in trade, misleading and deceptive conduct and unsubstantiated representations.<\/p>\n<p>All members of FANZ (membership is not compulsory) will need to comply with the FANZ Code.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any aspects of competition law that apply to the franchise transaction (i.e. is it permissible to prohibit online sales or use of online marketplaces (e.g. Amazon, third-party platforms), insist on exclusive supply, fix or set maximum retail prices, operate dual distribution\/hybrid franchisor models)? If applicable, provide an overview of the relevant competition laws.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>This area is currently uncertain in New Zealand with recent changes not yet clarified by court decisions and a further review by Parliament currently underway.<\/p>\n<p>In New Zealand, the Commerce Act 1986 prohibits the entering into or giving effect to cartel provisions between competitors (s 30). A cartel provision is a provision contained in a contract, arrangement or understanding between competitors (including potential competitors) for the supply or acquisition of goods or services which has the purpose, effect or likely effect of fixing prices, restricting output or allocating markets. Breach of the cartel prohibition is a criminal offence in New Zealand.<\/p>\n<p>The Commerce Act also prohibits the entering into or giving effect to a provision of a contract, arrangement or understanding (s 27), or a person with substantial market power from engaging in conduct (s 36), which has a purpose, effect or likely effect of substantially lessening competition in a relevant market.<\/p>\n<p>From 5 April 2023 the Commerce Act was amended to remove historic safe harbour protections for IP licensing agreements and the enforcement of statutory IP rights.<\/p>\n<p>Previously section 36(3) provided that a business does not take advantage of market power simply by enforcing a statutory IP right (eg a patent, trade mark, copyright). Section 45(1) also previously added that the Act\u2019s other prohibitions do not apply to the entering into of IP agreements (such as licences, settlement and co-existence agreements) in so far as they contained a provision that authorises something that would otherwise be prohibited by an IP right, or giving effect to such provisions. This could extend to restraints on operating areas, first and third line forcing and other structural arrangements.<\/p>\n<p>These protections have\u00a0 been removed, bringing New Zealand more into line with Australia (but Australia is more permissive of \u201cexclusive dealings\u201d so there is significantly more flexibility under the Australian regime) so for businesses operating in Australia a separate assessment is needed for each country. There is considerable uncertainty about the extent to which the removal of the IP \u201csafe harbour\u201d exception will impact the exercise of IP rights in New Zealand but this is under further review.<\/p>\n<p>The Commerce Act 1986 has recently been reviewed, including because of issues arising since the historic IP exceptions were removed, this is particularly relevant to business structures like franchising and licensing.\u00a0 The Commerce (Promoting Competition and Other Matters) Amendment Bill was introduced in December 2025 and, at the time of writing, is proceeding through its final parliamentary readings. If passed, the proposed amendments to the Commerce Act 1986 will empower the Commission to grant \u201cclass-exemptions\u201d for categories of low-risk conduct, introduce an additional streamlined collaborative activity clearance process, and establish a statutory notification regime allowing businesses to proceed with certain types of conduct unless the Commission objects. These changes are expected to impact franchise models given the inherent issues following the 2023 removal of the IP exception.<\/p>\n<p>Franchisors will licence IP to franchisees, and often the model means the franchisor is itself operating in the market also selling goods or providing services which means that they may be competitors for the purposes of the Commerce Act. Often franchise agreements contain restrictions which could therefore be viewed as potential cartel provisions (ie territorial, field-of-use or customer restraints). These provisions may therefore breach the Commerce Act\u2019s cartel prohibition or prohibition on anti-competitive arrangements unless one of the exceptions applies.<\/p>\n<p>The removal of the IP exceptions means that businesses with substantial market power which enforce statutory IP rights in a way that has the purpose and\/or effect of substantially lessening competition in a market are now subject to the s 36 market power prohibition. An owner of IP rights might have a substantial degree of power in a market simply by virtue of its ownership of those IP rights, especially if there are no acceptable substitutes for the products\/services the owner supplies in that market (for example, where the party is the first to patent a particular technology).<\/p>\n<p>The Commission considers this situation in its Guidelines on the Application of Competition Law to Intellectual Property Rights and notes that a refusal to license to a competitor or even a potential competitor may be a misuse of market power in those circumstances. The IP exceptions previously\u00a0 in place would have enabled this activity.<\/p>\n<p>New Zealand law also prohibits suppliers from specifying a minimum resale price or taking actions to enforce a specified price (including inducing or attempting to induce another person not to sell at a price less than that specified).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any ESG, compliance or supply chain-related legal requirements impacting franchise systems?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no New Zealand ESG, compliance or supply chain-related requirements specific to franchise systems.<\/p>\n<p>However, the franchisor and franchisee should assess and comply with laws relevant to the relevant business area. For example:<\/p>\n<ul>\n<li>there are mandatory climate related disclosure requirements for some financial market participants (typically large listed companies and financial institutions)<\/li>\n<li>the Modern Slavery Bill is currently before the New Zealand Parliament but it is unclear when the Bill will be enacted. If enacted, it would require reporting entities (currently an organisation with a consolidated revenue of NZ$100 million or more in two consecutive reporting periods that is either a New Zealand entity or an overseas company that carried on business in New Zealand) to prepare a modern slavery statement and comply with disclosure and reporting requirements<\/li>\n<li>general fair trading and employment laws continue to apply to franchise businesses, including in respect of supply chain and labour.<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are in-term non-compete and non-solicitation clauses enforceable and are there any limitations on the franchisor's ability to impose and enforce them?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, in-term non-compete and non-solicitation clauses are enforceable in some situations. All such clauses should be assessed in the context of competition law (ie to ensure the clause is not in breach of the Commerce Act 1986) and what is reasonable in the circumstances.<\/p>\n<p>From a competition law perspective, a franchisor&#8217;s ability to impose and enforce such clauses is most likely to be constrained where the franchisor and franchisee compete with each other, so that the restriction risks being characterised as a market allocation or output restriction cartel provision, or where the franchisor holds substantial market power such that enforcement risks breaching the misuse of market power prohibition. In case of a cartel prohibition, an applicable exception (such as the collaborative activity or vertical supply contract exceptions) will generally need to apply for the restriction to be permissible.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there an obligation (express or implied) to deal in good faith in franchise relationships?  If so, what practical effects does this have on the relationship between franchisor and franchisee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Currently, there is no express or implied obligation of good faith in franchisee \/ franchisor relationships under New Zealand law. However, the Fair Trading Act\u00a01986 prohibits unconscionable conduct in trade and one of the matters a court can consider when assessing whether conduct is unconscionable is whether the trader and affected person acted in good faith. Other matters include the parties\u2019 relative bargaining power, whether an affected person was able to understand any documents provided to them, and the terms and circumstances of any contract to which the conduct relates.<\/p>\n<p>The Fair Trading Act 1986 also prohibits misleading or deceptive conduct (which may include omissions), and unsubstantiated representations.<\/p>\n<p>It is possible that a general duty of good faith may be implied into \u201crelational\u201d contracts in future.\u00a0 Such duties have been discussed in recent years in the United Kingdom (including for example <em>Yam Seng PTE Ltd v International Trade Corporation Ltd<\/em> [2013] EWHC 111 (QB), <em>Bates v Post Office (No.3)<\/em> [2019] EWHC 606 (QB) and <em>Phones 4U Ltd (In Administration) v EE Ltd and others <\/em>[2023] EWHC 2826 (Ch)), where there is a growing line of authority suggesting that a duty of good faith will be implied into relational contracts.\u00a0 While the question of whether a contract is \u201crelational\u201d will depend on the facts of any particular case, broadly speaking, they are generally those which involve a longer-term relationship between the parties in which both sides made a substantial commitment, and where the nature of the contract requires a high degree of communication, co-operation and predictable performance by both parties.\u00a0 Franchise agreements are likely, under this formulation, to be relational contracts.<\/p>\n<p>In <em>Dymocks Franchise Systems (Pty) Ltd v Todd <\/em>[2004] 1 NZLR 289, the Privy Council expressly left open the question of whether there is room for the implication of an obligation of good faith into franchise agreements under New Zealand law.\u00a0 More recently in <em>Bathurst Resources Ltd v L&amp;M Coal Holdings Ltd<\/em> [2021] NZSC 85, the New Zealand Supreme Court also declined to resolve the resolve the place of good faith as an organising principle, or of an implied duty of good faith, in New Zealand contract law generally, preferring to determine the question in a case where it is necessary to do so.\u00a0 If the issue comes before the New Zealand courts again, the UK authorities on this issue will be persuasive (but not binding) authority.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any employment or labour law considerations that are relevant to the franchise relationship? Is there a risk that the staff of the franchisee could be deemed to be the employees of the franchisor? What level of operational control may a franchisor exercise without creating employment or agency risk?  What steps can be taken to mitigate this risk?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Like any other employer, franchisors and franchisees must comply with New Zealand employment and immigration laws in relation to their own employees.\u00a0 This includes requirements relating to minimum employment entitlements and, in the case of migrant employees, work visas.\u00a0 While franchisors will not employ a franchisee\u2019s employees, there is a risk that employees of a franchisee could join the franchisor as a party (called a \u2018controlling third party\u2019) to an employment claim against the franchisee.\u00a0 This will depend on the degree of direction and\/or control the franchisor has over the franchisee\u2019s employees.<\/p>\n<p>The level of control and\/or direction a franchisor can exercise over a franchisee\u2019s employees without creating employment or agency risk is fact specific and will be assessed on a case-by-case basis.\u00a0 Employment institutions will consider whether the franchisor exercises, or is entitled to exercise, a level of control or direction over the employee that is similar or substantially similar to that of an employer.\u00a0 Relevant factors may include whether the franchisor determines what work is performed, where and how it is carried out, the degree of supervision over the employee, and whether it sets performance and conduct standards of performance while the employee is providing the services.<\/p>\n<p>To mitigate the risk of being joined as a controlling third party, a franchisor should limit the degree of direction and\/or control it has over a franchisee\u2019s employees. The relevant franchise agreement should also expressly address how the franchisor and franchisee will respond to controlling third party claims and any associated liability.<\/p>\n<p>In the health and safety space, it is conceivable that a franchisor could be held jointly liable with a franchisee for a breach of the Health and Safety at Work Act 2015 (<strong>HSWA<\/strong>) for example where the franchisor and franchisee share a health and safety duty in relation to the same matter. Note that liability for a breach of the HSWA cannot be indemnified against.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a risk that a franchisee could be deemed to be the commercial agent of the franchisor? What steps can be taken to mitigate this risk?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes this is possible so generally a franchise agreement should clearly specify that the agreement does not create an agency relationship and ensure that arrangements that are typically those of an agency relationship are not included.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any laws and regulations that affect the nature and payment of royalties to a foreign franchisor and\/or how much interest can be charged? Are there any requirements for payments in connection with the franchise agreement to be made in the local currency?  Are there any restrictions on structuring payments (e.g. royalties vs service fees vs mark-ups)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no specific laws or regulations (such as exchange control restrictions) in New Zealand that affect a New Zealand resident\u2019s ability to make a payment of royalties or interest to a foreign franchisor.\u00a0 That said, New Zealand tax law can impose restrictions on tax deductions for payments of royalties or interest to related parties, and\/or re-characterise these amounts for tax purposes in certain circumstances (e.g. where they do not reflect market value). There are no requirements for payments in connection with a franchise agreement to be made in New Zealand dollars.<\/p>\n<p>The following may also impact:<\/p>\n<ul>\n<li>Anti-Money Laundering and Countering Financing of Terrorism Act 2009 which imposes obligations on certain entities (eg financial institutions, real estate agents) to have procedures and processes to detect, deter, manage and mitigate money laundering \/ financing of terrorism<\/li>\n<li>import tariffs, taxes and charges which may apply depending on the relevant business area<\/li>\n<li>United Nations Security Council sanctions \u2013 generally New Zealand implements these<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it possible to impose contractual penalties on franchisees for breaches of restrictive covenants etc.? If so, what requirements must be met in order for such penalties to be enforceable?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Previously, New Zealand law distinguished between penalty clauses, which were unenforceable, and liquidated damages clauses, which were enforceable provided that they represented a \u201cgenuine pre-estimate of loss\u201d.\u00a0 However, in <em>127 Hobson Street Ltd v Honey Bees Preschool Ltd<\/em> [2020] NZSC 53, [2020] 1 NZLR 179, the Supreme Court adopted the approach taken in the United Kingdom, holding that a penalty clause will only be unenforceable if the consequence stipulated in that clause is out of all proportion to the legitimate interests of the innocent party in performance.\u00a0 Such a clause would have to be \u201cexorbitant\u201d.\u00a0 The courts will consider a range of factors when determining whether such clauses are unenforceable (including the bargaining power of the parties and whether they were legally advised) and legitimate interests may extend beyond the loss caused by the breach measured by a conventional assessment of compensatory damages and there may be a legitimate interest in deterring breach of the primary obligations.<\/p>\n<p>A franchisor can impose contractual penalties on franchisees for breaches of restrictive covenants, provided those penalties are in proportion to the legitimate interests of the franchisor.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What tax considerations are relevant to franchisors and franchisees? Are franchise royalties subject to withholding tax?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no tax rules or regimes that are specific to franchisors. Instead, the ordinary tax rules will apply to franchisors. In general, non-resident entities will be subject to New Zealand tax on their New Zealand sourced income, subject to:<\/p>\n<ul>\n<li>Tax treaty relief. \u00a0New Zealand has an extensive tax treaty network.\u00a0 Where a non-resident is eligible for treaty benefits under a treaty with standard \u201cbusiness profits\u201d and \u201cpermanent establishment\u201d articles, the non-resident will generally not be subject to New Zealand income tax on New Zealand sourced business profits except to the extent they are attributable to a permanent establishment maintained by the non-resident in New Zealand.<\/li>\n<li>Withholding tax rules for certain forms of income.\u00a0 For example, New Zealand non-resident withholding tax may apply to royalties paid by a New Zealand franchisee to a non-resident franchisor.\u00a0 The definition of \u201croyalties\u201d in New Zealand Income Tax legislation includes a payment for know-how. The default rate of non-resident withholding on royalties is 15%, which may be reduced to 10% or 5% under a tax treaty.<\/li>\n<\/ul>\n<p>Non-residents will also need to consider their liability for New Zealand\u2019s goods and services tax (New Zealand\u2019s VAT), which broadly applies to supplies of goods and services to New Zealand consumed in New Zealand and can apply to supplies made by non-residents with no presence in New Zealand.\u00a0 New Zealand employment related withholding taxes may be applicable to payments of salary and wages to New Zealand based employees and contractors (in certain circumstances).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How is e-commerce regulated and does this have any specific implications on the relationship between franchisor and franchisee?  For example, can franchisees be prohibited or restricted in any way from using e-commerce in their franchise businesses?  Are there any rules regarding online sales within or outside a franchisee\u2019s territory?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>E-commerce is regulated by a range of statutes in New Zealand including the Fair Trading Act 1986, the Consumer Guarantees Act 1993 and the Contract and Commercial Law Act 2017.<\/p>\n<p>The Consumer Guarantees Act 1993 sets out guarantees in respect of goods and services that are purchased for personal use in New Zealand. Depending on the nature of the defect and subject to conditions\/exceptions, consumers may have rights of redress against the supplier or the manufacturer (or both) in relation to defective goods or services. This means that consumers may have rights of redress against franchisors and\/or franchisees.<\/p>\n<p>Arrangements which restrict a franchisee\u2019s use of e-commerce, reserving this channel to market for only some franchisees or the franchisor can raise issues under the Commerce Act 1986, and will need to be carefully considered.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the applicable data protection laws and do they have any specific implications for the franchisor\/franchisee relationship?   In particular, what are the key data protection considerations in a franchise relationship, including: (a) allocation of controller\/processor roles; (b) use of customer databases; (c) cross-border data transfers; and (d) marketing and CRM activities?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>New Zealand does not have a franchise-specific data protection regime. Instead, the collection, use, storage and disclosure of personal information is governed by the Privacy Act 2020. Both franchisors and franchisees will need to comply with their respective obligations under the Privacy Act in relation to any personal information they collect, hold or process. Personal information is broadly defined as any information about an identifiable individual.<\/p>\n<p><em>Controller \/ Processor Roles<\/em><\/p>\n<p>The Privacy Act does not expressly adopt the concepts of &#8220;controller&#8221; and &#8220;processor&#8221;. Rather, obligations generally attach to the agency that is treated as &#8220;holding&#8221; the personal information.\u00a0 Under section 11 of the Privacy Act, where an agency holds personal information solely on behalf of another agency (i.e. as a service provider\/processor), the information is treated as being held by the principal agency rather than the service provider, provided the service provider does not use or disclose the information for its own purposes. In those circumstances, the transfer of personal information from the principal agency to the service provider is not regarded as a use or disclosure for the purposes of the Privacy Act.\u00a0 However, where a franchisor and franchisee each hold and use personal information for their own independent business purposes, both entities will generally be regarded as holding the information and must separately comply with the Privacy Act in relation to their collection, use, storage and disclosure of that information.<\/p>\n<p><em>Use of Customer Databases<\/em><\/p>\n<p>Under Information Privacy Principle (IPP) 1, an agency may only collect personal information where the collection is for a lawful purpose connected with one of the agency&#8217;s functions or activities and the collection is necessary for that purpose. This requirement applies equally to franchisors and franchisees in relation to any personal information obtained through a shared or centralised customer database.\u00a0 Further, under IPP 3, where personal information is collected directly from an individual, the collecting agency must take reasonable steps to ensure the individual is informed of matters including:<\/p>\n<ul>\n<li>the fact that the information is being collected;<\/li>\n<li>the purpose of collection;<\/li>\n<li>the intended recipients of the information; and<\/li>\n<li>the identity of the agency collecting and holding the information.<\/li>\n<\/ul>\n<p>Accordingly, where customer information will be entered into a shared or centralised database accessible by both a franchisor and franchisee, the collecting party should ensure its privacy notice clearly identifies both entities and explains how each may use the information.\u00a0 Where a franchisor or franchisee obtains personal information indirectly, for example by receiving customer information from the other party, IPP 3A may impose separate notification obligations. In those circumstances, the receiving party may be required to take reasonable steps to notify affected individuals of its indirect collection of the information, the purposes for which it will be used, the intended recipients, and the identity of the agency holding the information, unless an exception applies.\u00a0 As a result, both franchisors and franchisees will have independent Privacy Act obligations in relation to the collection and use of personal information contained within shared customer databases.<\/p>\n<p><em>Cross-Border Data Transfers<\/em><\/p>\n<p>The disclosure of personal information to overseas recipients is regulated by IPPs 11 and 12 of the Privacy Act.\u00a0 Personal information may only be disclosed overseas where a permitted disclosure ground under IPP 11 applies and one of the safeguards in IPP 12 is satisfied. These safeguards include circumstances where:<\/p>\n<ul>\n<li>the individual has expressly authorised the disclosure after being informed that overseas privacy protections may differ from those available under New Zealand law;<\/li>\n<li>the overseas recipient is carrying on business in New Zealand and is subject to the Privacy Act;<\/li>\n<li>the recipient is subject to privacy laws that provide protections comparable to those under New Zealand privacy law; or<\/li>\n<li>the recipient is contractually required to protect the information in a manner that provides comparable safeguards to those contained in the Privacy Act.<\/li>\n<\/ul>\n<p>These requirements apply to disclosures to any overseas entity, including group companies and affiliates, and are therefore relevant where customer information is shared with offshore franchisors.<\/p>\n<p><em>Marketing and CRM Activities<\/em><\/p>\n<p>The use of personal information for marketing and customer relationship management purposes must comply with the Privacy Act&#8217;s requirements relating to the use and disclosure of personal information. In particular, personal information should only be used for marketing where the use is authorised by the individual or is otherwise consistent with the purpose for which the information was originally collected.<\/p>\n<p>In addition, the Unsolicited Electronic Messages Act 2007 prohibits the sending of unsolicited commercial electronic messages without the recipient&#8217;s consent. Consent may be express, inferred or deemed, depending on the circumstances. The Act also requires commercial electronic messages to contain prescribed sender information and a functional unsubscribe facility.\u00a0 Accordingly, franchisors and franchisees engaging in email, SMS or other electronic marketing activities should ensure they have an appropriate basis for contacting customers and that all marketing communications comply with the requirements of the Unsolicited Electronic Messages Act.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the franchisor permitted to restrict the transfer of (a) the franchisee's rights and obligations under the franchise agreement or (b) the ownership interests in the franchisee?  Can the franchisor impose conditions on transfers (e.g. approval rights, fees, qualification criteria)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Restrictions and conditions on transfer of the franchisee&#8217;s rights and obligations under the franchise agreement and\/or the ownership interests in the franchisee can be imposed by contract, subject to New Zealand contract and commercial law requirements including a prohibition on unfair contract terms. There is no statutory restriction under New Zealand law. Provisions covering assignment and change of control are often included in franchise agreements and can include regimes where consent of the other party is required prior to entering into such arrangements, or in some cases a first right of refusal for the other party.<\/p>\n<p>From a competition law perspective, where the franchisor and franchisee compete, consent-to-transfer and approval conditions potentially risk being characterised as market allocation cartel provisions which are prohibited under the Commerce Act 1986 unless an exception applies (such as the collaborative activity or vertical supply contract exceptions). A franchisor with substantial market power should also consider whether exercising consent rights to block a transfer could constitute misuse of market power.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">To what extent can a franchisor impose audit rights, reporting obligations, and operational controls on a franchisee, and what legal limits apply?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A franchisor can impose obligations on a franchisee including audit rights, reporting obligations and operational controls by contract, subject to New Zealand contract and commercial law requirements including a prohibition on unfair contract terms. There is no statutory restriction under New Zealand law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does a franchisee have a right to request a renewal on expiration of the initial term? In what circumstances can a franchisor refuse to renew a franchise agreement? If the franchise agreement is not renewed or it if it terminates or expires, is the franchisee entitled to compensation? If so, under what circumstances and how is the compensation payment calculated?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no requirements under New Zealand law. Note New Zealand contract and commercial law requirements including the Fair Trading Act 1986 that prohibits unconscionable conduct in trade, misleading or deceptive conduct (which may include omissions), unsubstantiated representations, and unfair contract terms. The parties&#8217; conduct can result in terms being implied into the franchise agreement. Likewise, if a franchisor does not exercise its rights at expiry\/termination, this may, in some cases, imply a renewal of the agreement. Whether this occurs depends on both the specific terms of the franchise agreement and the actions of the parties.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any mandatory termination rights which may override any contractual termination rights? Is there a minimum notice period that the parties must adhere to?  Are there any requirements regarding notice periods and opportunities to remedy breaches before termination?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no mandatory termination rights, minimum notice periods or other termination requirements. Note New Zealand contract and commercial law requirements including a prohibition on unfair contract terms.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any intangible assets in the franchisee's business which the franchisee can claim ownership of on expiry or termination, e.g. customer data, local goodwill, etc.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>For clarity ownership of intangible assets including customer data and goodwill should be covered in the franchise agreement, including any requirements on expiry or termination of the franchise agreement.<\/p>\n<p>If the franchise agreement does not specifically cover intangible assets the general position at law will apply. Generally in New Zealand the first owner of copyright works is the author of the work (s21 Copyright Act 1994) unless certain exceptions apply (ie in relation to works created by employees and commissioned works) or the ownership position at law is varied by contract.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What post-termination obligations are typically enforceable (e.g. de-branding, return of confidential information, non-compete, non-solicitation) and how readily are such post-term restrictions enforced in practice?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Typical post-termination obligations would include de-branding and return of confidential information.<\/p>\n<p>Post-termination non-compete and non-solicitation restraints are generally enforceable in New Zealand where they are reasonably necessary to protect a legitimate commercial interest, such as the franchisor&#8217;s goodwill, and are no wider than reasonably required in scope, geographic area and duration. Where the franchisor and the restrained party are or were competitors, such restraints (and equivalent obligations imposed on a purchaser or successor operator) should be assessed against the Commerce Act 1986, in particular whether they could be characterised as a market allocation cartel provision or potentially result in a misuse of market power<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a national franchising association? Is membership required?  If not, is membership commercially advisable? What are the additional obligations of the national franchising association?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, the Franchise Association of New Zealand. Membership is not compulsory but is common with leading New Zealand franchisors. Members must comply with the FANZ Code and must submit their documentation for review to check that their processes and information are compliant.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are foreign franchisors treated differently to domestic franchisors? Does national law\/regulation impose any debt\/equity restrictions?  Are there any restrictions on the capital structure of a company incorporated in your country with a foreign parent (thin capitalisation rules)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A foreign franchisor is generally treated the same as a resident franchisor. There are differences relating to certain overseas investment and tax law.<\/p>\n<p>Overseas investment in New Zealand is governed by the Overseas Investment Act 2005, under the Act certain investors require approval to acquire a direct or indirect interest in sensitive assets (including some New Zealand land). In general terms, the Act seeks to regulate the acquisition of interests in certain land, and the acquisition of assets which are worth more than NZ$100m. Transactions can also be caught where securities in entities directly or indirectly having such land or assets are acquired above 25%. These are not the only categories of consent, and additional conditions apply to interests in strategically important businesses, depending on the type of business. Further if the investment changes the status of the target ie into an overseas person because of percentages of existing overseas ownership then consent is also needed.<\/p>\n<p>New Zealand\u2019s tax rules include thin capitalisation rules that can reduce the income tax deduction available for interest paid by a NZ subsidiary of a foreign parent where the NZ subsidiary\u2019s debt to asset ratio exceeds certain prescribed safe harbours. Non-resident franchisors should also consider the application of New Zealand\u2019s transfer pricing rules, anti-hybrid rules and anti-avoidance rules (among other things) when setting up related party structures in New Zealand.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Must the franchise agreement be governed by local law?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No, the parties are free to choose the governing law. The franchise agreement should clearly specify the governing law and forum, and whether this is exclusive or non-exclusive.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What dispute resolution procedures are available to franchisors and franchisees?  Are there any advantages to out of court procedures such as arbitration versus litigation, in particular if the franchise agreement is subject to a foreign governing law?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The dispute resolution procedures available to franchisors and franchisees will depend on the terms of their franchise agreement.\u00a0 If, for example, the franchisor is a member of FANZ, the FANZ Code stipulates that any franchise agreement contain alternative dispute resolution provisions which are the same, or similar in effect to, provisions set out in the Code itself.\u00a0 These provisions set out a cascading set of dispute resolution procedures whereby the parties are to seek to resolve any dispute by mutual negotiation in the first instance and, failing that, they are to attend mediation.<\/p>\n<p>There are no New Zealand-specific advantages to alternative dispute resolution procedures such as mediation or arbitration.<\/p>\n<p>If the franchise agreement is subject to a foreign governing law, arbitration may be preferable to foreign court proceedings depending on whether there exists an agreement on the reciprocal enforcement of judgments between the country in which the foreign judgment would be issued and New Zealand.\u00a0 Foreign arbitral awards are readily enforceable in New Zealand under the Arbitration Act 1996, which gives effect to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (<strong>New York Convention<\/strong>).\u00a0 Depending on the circumstances, this may provide a degree of certainty of enforcement that may not be available for a foreign court judgment absent a reciprocal enforcement arrangement<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Must the franchise agreement and disclosure documents be in the local language?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The official languages of New Zealand are English, Te reo M\u0101ori and New Zealand Sign Language. Generally franchise agreements are in English.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it possible to sign the franchise agreement using an electronic signature (rather than a wet ink signature)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under New Zealand law electronic signatures are generally permitted and can be used to sign a franchise agreement provided certain conditions are met ie the electronic signature (a) adequately identifies the signatory and adequately indicates the signatory\u2019s approval of the information to which the signature relates and (b) is as reliable as is appropriate given the purpose for which, and the circumstances in which, the signature is required (s226 Contract and Commercial Law Act 2017). The franchise agreement should include a provision stating that electronic signatures are acceptable.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do you foresee any significant commercial or legal developments that might impact on franchise relationships over the next year or so?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The proposed amendments to the Commerce Act 1986 are the most significant near-term developments for franchise relationships. If enacted, the introduction of the class-exemption, additional collaborative activity clearance process, and statutory notification regime could materially alter the competition law framework within which franchise models operate.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">9369<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/149966","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=149966"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}