42Restraint of trade clause if franchise agreement not renewed or extended

42 Restraint of trade clause if franchise agreement not renewed or extended

A franchisor must not enter into a franchise agreement that includes (in the agreement, or in another document physically attached to the agreement, or in another document incorporated into the agreement by reference) a restraint of trade clause that would apply if: (a) the franchise agreement expires; and (b) the franchise agreement contained an option for the franchisee to renew or extend the agreement; and (c) before the expiry, the franchisee had given written notice to the franchisor seeking to renew or extend the agreement on substantially the same terms as those: (i) contained in the franchisor’s current franchise agreement; and (ii) that apply to other franchisees or would apply to a prospective franchisee; and (d) before the expiry, the franchisee met any conditions contained in the franchise agreement that were required to be met by the franchisee to renew or extend the agreement; and (e) immediately before the expiry, the franchisee was not in serious breach of the agreement or any related agreement; and (f) the franchisee had not infringed the intellectual property of, or a confidentiality agreement with, the franchisor during the term of the agreement; and (g) the franchisor did not renew or extend the agreement; and (h) either: (i) the franchisee claimed compensation for goodwill because the agreement was not renewed or extended, but the compensation given was merely a nominal amount and did not provide genuine compensation for goodwill; or (ii) the agreement did not allow the franchisee to claim compensation for goodwill in the event that it was not renewed or extended.

Civil penalty: 600 penalty units.