Ketchell Case Not Without Precedent

SmartCompany.com.au:

The decision announced by the Franchise Council of Australia (FCA) to fund the appeal in the High Court of the Ketchell case should come as no surprise to the franchise sector given the amount of publicity the issue has received recently.

The FCA is saying that the precedent established by the Ketchell case would create vast uncertainty for both franchisors and franchisees if it goes unchallenged.

At its heart is the fundamental issue that a technical breach of the Franchising Code of Conduct can render a franchise agreement illegal, and by doing so, this can negatively affect the value of the businesses of both franchisees and franchisors.

Franchisors could potentially lose royalty income from a franchisee where an agreement has been made void due to a technical breach, and they may be required to refund all money paid under the agreement, including all royalties and up-front fees. There is also a risk that the franchisee could profit from its access to the franchisor’s business know-how, operations manual and trade secrets, without any compensation to the franchisor. Read more.