Modernising your franchise system - Risky Business

Franchising, as a sector, is fairly new in Australia, relative to other forms of doing business. As such, some franchise systems operate on the basis of agreements, standards and procedures that were drafted at a time when franchising was much less sophisticated than it is today. These legacy issues can have a profound impact on the ways that the business operates and on the relationship between franchisor and franchisee. While franchisors may wish to clean up these legacy issues for legitimate business reasons, they must approach with extreme caution any changes to franchise agreements, systems and procedures to modernise them by adopting current "best practice". A recent decision of the Federal Court of Australia highlights some of the dangers involved in the introduction of modern franchising standards to a long standing franchise relationship.