43Franchise agreement must provide for compensation for early termination—general

43 Franchise agreement must provide for compensation for early termination—general

(1) This section applies to a franchise agreement that is not a new vehicle dealership agreement. (2) A franchisor must not enter into a franchise agreement unless the agreement: (a) provides for the franchisee to be compensated if the agreement is terminated before it expires because the franchisor: (i) withdraws from the Australian market; or (ii) rationalises its networks in Australia; or (iii) changes its distribution models in Australia; and (b) specifies how the compensation is to be determined, with specific reference to the following: (i) lost profit from direct and indirect revenue; (ii) unamortised capital expenditure requested by the franchisor; (iii) loss of opportunity in selling established goodwill; (iv) costs of winding up the franchised business.

Civil penalty: 600 penalty units.

(3) A franchisor must not enter into a franchise agreement unless the agreement contains provision for the franchisee to return, and the franchisor to accept and buy back or compensate the franchisee for, the things mentioned in subsection (4) if the agreement is terminated before it expires because the franchisor: (a) withdraws from the Australian market; or (b) rationalises its networks in Australia; or (c) changes its distribution models in Australia.

Civil penalty: 600 penalty units.

(4) For the purposes of subsection (3), the things are the following: (a) all the outstanding stock of the franchise purchased by the franchisee that was specified by the franchisor and required in order to operate the franchise in accordance with the franchise agreement or any operations manual (however described); (b) all the essential specialty equipment, branded product or merchandise purchased by the franchisee that: (i) was specified by the franchisor and required in order to operate the franchise in accordance with the franchise agreement or any operations manual (however described); and (ii) cannot be repurposed for a similar business. (5) A franchisor must not enter into a franchise agreement that contains a provision that purports to exclude any compensation to which the franchisee may be entitled, other than under the agreement, if the agreement is terminated before it expires other than because the franchisee has breached the agreement.

Civil penalty: 600 penalty units.