How to Change Your Supply Chain – What Franchisors Should Know

Franchising is a system of doing business. As a franchisor, you have achieved a proven system for success through your brand and product consistency, and you have opted to duplicate that system by franchising.

An inherent element of franchising is that customers expect to receive identical goods and service-levels across all franchises within a franchise system. For example, an expectation that the same burger at any store in a chain will taste the same.

Successful systems often have established arrangements for the supply of products, ingredients or services to all franchisees within a network. Most franchisors will require their franchisees to only source products from a nominated or approved supplier.

Franchisors will often secure special wholesale rates with their suppliers, resulting in cost savings to franchisees. Using a single or select few suppliers ensures consistency.

Just like any business owner, franchisors must ensure that supply arrangements continue to remain beneficial to the system. Changes in the marketplace or the introduction of new suppliers offering competitive rates may prompt franchisors to consider changing their nominated supplier.

If you’re considering changing your supply chain, then there are a few key things you should consider:

9 tips for changing your supply chain

1. Due diligence

Due diligence enquiries into the prospective new supplier. Do they have the capacity to fulfil the needs of your entire franchise network and deliver a standard of consistency in both product and service comparable or better than your current supplier? Can you leverage the existence of this new supplier to negotiate a better deal with your current supplier?

2. Exit rights

Do you have a formal supply agreement with your existing supplier? If so, what rights do you have to exit the agreement? You don’t want to place yourself in breach of your contractual obligations to your existing supplier by engaging with a competitor.

3. Franchisee obligations

 Check your existing franchise agreements and disclosure documents for any specific obligations you may have to franchisees. Most franchise agreements will generally give franchisors flexibility to change suppliers at their discretion.

However, sometimes there are guidelines that must be followed, such as giving a certain period of notice to franchisees regarding the change, or only implementing a change if a majority of franchisees agree.

4. Are benefits real?

What are the benefits of changing the supplier? If it’s solely a monetary benefit for the franchisor and will diminish the profitability of franchisees, then franchisees could allege you are breaching the Franchising Code of Conduct by acting in bad faith. If the new supply arrangements prevent franchisees from making a profit, they could also accuse you of acting unconscionably.

5.  Communicating to franchise network

How will you communicate the change to your franchise network? Franchisors must ensure that any proposed supplier change is clearly communicated to franchisees with reasonable notice, along with full details on why the change is being proposed and what the benefit will be. Be prepared to justify your decision and communicate your proposal in a positive way.

Franchisees will also need a grace period to run down any current stock they have at hand before they begin purchasing from a new supplier.

6.  Third line forcing

Speak to your lawyer about whether the change could constitute third line forcing.

Third line forcing is a form of exclusive dealing, where a business will only supply goods or services, or give a particular price or discount, on the condition that a person buys the goods or services from a nominated third party.

If the person does not comply with the condition, then the business will refuse to supply the goods or services. If this conduct has the effect or likely effect of substantially lessening competition in the marketplace, then a notification must be lodged with the ACCC before engaging in the conduct.

While the laws on third line forcing were loosened on 6 November 2017, the ACCC will continue to tightly monitor any actions which may infringe anti-competition laws.

7. Updating information

Update your approved supplier list, which will often be contained in your franchise system’s operations manual. The updated manual should then be provided to all franchisees.

8. Disclosure

If you’ll be receiving a rebate from a supplier, ensure that this is disclosed in Item 10.1(j) of your disclosure document. Rebates can help to supplement a franchisor’s head office costs and reduce the fees you would otherwise need to charge franchisees.

9. Finally, have a backup plan.

As KFC’s recent chicken-shortage debacle in the UK has shown, changing suppliers can have drastic effects on a franchise system. KFC’s new supplier was unable to supply enough chicken to franchisees, resulting in the temporary, and somewhat embarrassing, closure of many stores. Fortunately, KFC saw the humour and irony in the situation, apologising to its customers on social media with a cheeky ad.

Changing supply chains can achieve long-term benefits for an entire franchise system. By expecting the best but planning for the worst, franchisors can minimise disruptions and ensure a smooth transition.

This Article was previously published on the Inside Franchise Business website.

For a no-obligation, confidential discussion with our experienced team regarding all franchising matters, contact Rouse Lawyers on 07 3667 9696

Why You Should Care What Legacy You Leave

When you die, you can gift your physical possessions, but you also have an opportunity to pass on your values, attitudes and philosophies.

When considering your Will and Legacy, create opportunities for flexibility and choice (within a structured environment).  Too many limitations can exacerbate poor relationships and create unnecessary expense – stay true to your ideals and make practical choices!

1. Gift a Well-Organized Estate

Minimise the time and effort required for others to work out what your legacy is.

This is done by:

a)  A well-drafted Will including consideration of non-Estate assets;

b)  Collating all information about your insurance policies, superannuation funds, Trust Deeds, location and contact information for beneficiaries,assets/debts, litigation possibilities, employers/employees…..and much much more!

c) Provide a road-map to help survivors navigate your digital records, and weed out irrelevant information.

d) Clarify Burial/Cremation wishes and remove indecision that can lead to family disputes.

e) Clarify how you expect disputes over matters to be resolved.  Simultaneously providing gifts and easy opportunities to resolve any disputes can lessen the impact of potential conflict.

f) Consider whether nominated Executors can distribute your estate harmoniously, whilst also staying strong in times of external pressure.

2. Create strategies to maximize the potential of your estate

a)  Consider potential claimants to your estate to ensure your loved ones are not disadvantaged.  Take into account any toxic relationships and consider how you can counteract this in your Will and Estate Plan.

b)  Enable flexible gifting in well-tested Testamentary Discretionary/Family Trusts to maximize gifts available to people you love, whilst quarantining your estate from the risk of bankruptcy, poor money management or undue pressure.

c)  Empower Trustees to invest in a long-supported charity.  By establishing and/or contributing to already existing charities you can generate a family legacy of giving towards something that you value!

Commit an hour of your time (to save hours of grief to your Family) and let us educate you on the Key Estate Planning documents necessary to fulfil your goals.  You will receive a clear considered plan and fixed fee quote.

Let our practical and approachable team help you put in place a well crafted Estate Plan that will maximize the benefits available to your loved ones and minimize the potential for family conflict, allowing you to focus on building your wealth and on your family.

For a no-obligation, confidential discussion with our experienced team regarding all estate planning matters, contact Rouse Lawyers on 07 3667 9696

So you’ve been hacked…

Data breaches are a common occurrence in the tech world. In the past, if you wanted to steal information, you would have had to buy a crowbar, break a window and jimmy open a filing cabinet. These days, however, stealing data is as easy as guessing a password. Whether your breach is due to a phishing scam, a patchy security system, or Janet in accounting, most modern companies have to deal with the issue of digital security.

In recognition of this fact, the Australian government recently amended the Privacy Act to include the Notifiable Data Breaches Scheme, a comprehensive guide on how to deal with a data breach. Of course, in law-land, “comprehensive” is often a synonym for “mind-numbing”, so we’ve put together a short guide on how you should deal with data breaches that won’t put you to sleep.

What is a data breach?

A data breach is anything that results in somebody having unauthorised access to information, and which is likely to result in serious harm. It’s pretty context-specific. For example, if your toddler steals your phone, guesses your work password and sends a selfie to your boss, that’s probably not a serious data breach. However, if a 30-year-old Russian hacker does the same thing to your entire work contact list, it might result in serious harm.

C.A.T.S

If you suffer a data breach, there’s one thing you need to remember: CATS. It’s an initialism we came up with to simplify the data breach process. (It also doubles as a reminder to look at cats on the internet, which is a great way to relieve stress after a data breach).

• Control - If you think a breach has happened, your first job is to control the situation. Stop the breach to the extent that you can, lockdown, and identify what information might have been breached.
• Assess - Assess the situation. Ask whether serious harm is likely. If it is, you need to conduct an assessment of the incident and decide whether you can do anything to fix the harm arising from the breach.
• Talk - If your assessment reveals that serious harm is likely, you need to make a submission to the Australian Information Commissioner. A standard form is available here. You also need to notify anybody who might be harmed by the breach, either by contacting them directly or posting a message on your website. We also recommend apologising – it’s good manners.
• Summarise - In the wake of a data breach, you need to summarise the incident and make a plan to stop breaches from taking place in the future. Consider making staff training mandatory, auditing your platform, or hiring an internet security company to manage your systems. In short, do whatever will stop that ageing Russian hacker from sending more poorly-lit selfies to your managing partner.

You should also look at cats on the internet. Seriously, it’ll calm you right down.

If you’d like to discuss your Data Security call Rouse Lawyers’ technology team on 07 3667 9696.

Fair Enough: Australian Copyright Law and Content Creators

By David Rose 

If you’ve ever been on YouTube, you may have noticed something funny crammed between the spittle-flecked invective comments section and the video. It usually looks something like this:

“Copyright Disclaimer Under Section 107 of the Copyright Act 1976, allowance is made for “fair use” for purposes such as criticism, comment, news reporting, teaching, scholarship, and research. Fair use is a use permitted by copyright statute that might otherwise be infringing. Non-profit, educational or personal use tips the balance in favor of fair use.”

This disclaimer pops up on video games, music videos, and even adult websites, like the world’s nerdiest virus. All over the globe, people are taking copyrighted stuff and reissuing it under the doctrine of “fair use”.

What is fair use?

Like deep fried butter and deep fried Coca-Cola, fair use is an American concept. It was codified in the U.S. in 1978 and provides protection to people seeking to use the copyrighted material of others. When deciding what is “fair”, the courts consider:

a)    the purpose and character of the use;

b)    the nature of the copyrighted work;

c)     the amount of the work used as a whole; and

d)    the effect that the use would have on the value of the copyright.

If the courts consider the use of the copyrighted work ‘fair’, then the person using it does not have to seek permission from the copyright holder. Usually, this means that the person using the copyrighted material isn’t seeking to devalue the copyright, or make an easy profit by republishing it as their own.

How does fair use work?

Here’s an example of how these rules work: imagine a person wants to use this photograph with the caption ‘Brisbane’s best lawyer!’ in a testimonial. The photograph is copyrighted material, so can our reviewer use it? If we assume that the intention of the testimonial is not to devalue the existing copyright, or to make a profit from it, the photo and caption would probably be considered fair use under American law. Fair use allows you to make a comment, to criticise, to teach, to report news and to research, without having to get permission from copyright holders first.

Fair dealing in Australia

Australian law doesn’t currently contain a ‘fair use’ provision. Instead, we have something called ‘fair dealing’, which sounds like something a morally upstanding drug dealer might consider. Fair dealing is much more limited than fair use, and only allows copyrighted material to be used in five ways:

1-Criticism and review;

2-Satire or parody;

3-News;

4-Legal advice; and

5-Research and study.

When deciding whether a use is ‘fair’, we consider very similar things to the Americans. We ask how much of the work is going to be copied, whether the use will devalue the original, whether the original creator will be given credit, and a few other issues.

Should Australia adopt fair use?

There are good arguments for Australia adopting fair use. For one thing, it’s clear that Australia is the legal equivalent of a 60-year old with sciatica… incredibly inflexible. Fair dealing is limited to 5 categories, which means we have pre-set guidelines as to what is fair dealing. If something new and novel comes along, our laws might not be able to deal with it properly.

Think about VCRs, for example. Remember those? They were the mutant cousins of cassette tapes that we used to watch videos on. Wait, you don’t remember cassette tapes? Oh, God. We’re getting old. See, back in the 90s, before TV was in the cloud and the cloud was full of carbon monoxide, people used to tape Friends and Fraiser using their VCR. That way, they could watch their shows any time they liked! It was like Netflix, but instead of being “on demand”, your shows were “in the cupboard” under a box of old socks.

In America, the home taping craze was allowed under the doctrine of fair use. When people were pirating copyrighted shows, fair use stepped in to save the day. Things went a little bit differently in Australia. Fair dealing didn’t apply to the new technology of VCRs, and home taping remained illegal (despite the fact that everybody did it) until 2006. For reference, that’s 6 years after the DVD-ready PlayStation 2 came out.

A lot of companies are jostling for fair use provisions in Australia. Both Google and Wikipedia believe that Australians need fair use. They argue that if their companies had begun in Australia, our copyright laws would have killed them before they even started. Wikipedia’s use of copyrighted images, for example, would almost certainly be prohibited under Australian law. The Australian Law Reform Commission also believes in fair use, stating that “fair use would provide flexibility to respond to changing conditions and would assist innovation.”

It seems fairly obvious to us that allowing fair use would give Aussies a fair go, and that sounds fair enough to us. Fair dinkum.

If you’d like to discuss the Australian Copyright laws, call Rouse Lawyers’ technology team on 07 3667 9696.

Compliance with new employment laws: ‘reasonable steps’ franchisors can take

By Luke McKavanagh, Justine Ansell & Matthew Rouse 

The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (the Act)took effect on 15 September 2017. The Act was triggered in response to the highly publicised 7-Eleven employee underpayment scandal which has engulfed the franchise sector since late 2015, along with several recent systemic underpayment scandals by Domino’s Pizza and Caltex franchisees.

The key changes brought by the Act include:

1- new offences and increased financial penalties (details below) for breaches of workplace laws, including those who underpay employees, fail to keep correct time and wage records, fail to issue compliant pay slips and/or who force employees to repay wages (the ‘cash-back’ scheme that 7-Eleven was recently embroiled in);

2- increased investigative powers of the Fair Work Ombudsman, including increased powers to inspect and require employers to provide employment records and attend interviews under oath;

3- new offences and liability provisions for franchisors and parent companies making them liable in some circumstances for the actions of their franchisees and subsidiaries; and

4- a new onus of proof that effectively means someone is presumed guilty of an alleged underpayment if they cannot show, to the satisfaction of a court (e.g. through adequate employment records or other means) that they have paid their employees correctly. This means keeping the required employment records will become critical moving forward.

What the new laws mean for franchisors

The Act holds franchisors and holding companies responsible for underpayments and workplace law breaches by their franchisees or subsidiaries if the franchisor or holding company knew, or reasonably should have known, about the contravention and failed to take reasonable steps to prevent it. This greatly expands on the existing laws and has massive ramifications on the franchising industry.

The franchise-specific provisions of the legislation will only apply to franchisors who have a significant degree of influence or control over the affairs of their franchisees. How this influence or control will be assessed is yet to be determined because the legislation hasn’t been tested in the courts.

The legislation means that if a franchisee underpays an employee, fails to keep proper employment records or contravenes another workplace law (for example discrimination or bullying) then the employee could make a claim against the franchisor. The Fair Work Ombudsman can also institute proceedings against the franchisor. In the eyes of the law the franchisor could be seen as the party at fault, responsible and liable to pay compensation.

The legislation also adopts a much broader definition of what constitutes a franchise relationship compared to the definition under the Franchising Code of Conduct. This means that many licencing or distribution arrangements will be caught. For example, if a distributor underpays an employee then the employee could have recourse against the distributor’s supplier.

Sham contracting arrangements should also be kept in mind. If a franchisee was to engage a worker as a ‘contractor’ but in actual fact that worker should be classed as an ‘employee’, then this will be a breach of a workplace law, exposing the employer to a range of risks including underpayments, compensation and financial penalties. The worker may also have recourse against the franchisor.

What franchisors should do

If franchisors have significant control or influence over their franchisees then they need to take reasonable steps to limit their liability. Franchisors can no longer turn a blind eye and not take action if they have cause to suspect a franchisee is contravening workplace laws. Franchisors must now pay closer attention to how their franchisees manage their personnel and employment processes.

The crux of the legislation is that franchisors need to have reasonable steps in place to monitor compliance with workplace laws. Because the correct approach to determine what ‘a significant degree of control or influence over the affairs of a franchisee’ has not yet been determined, then from a risk-management point of view, or if adopting a conservative approach, then the prevailing view amongst industry professionals is that franchisors should assume that they do have such control and take reasonable steps.

What is a ‘reasonable step’ on a franchisor’s behalf will depend on the circumstances on a case-by-case basis. It is clear from the legislation that the more steps a franchisor takes, the less likely they are to be held liable.

If franchisors feel that they don’t have a degree of control or influence over franchisees then they need to be able to back that up.

As flagged above, the prevailing view amongst industry professionals which we recommend (at least until the legislation is tested and there is legal precedent) is to adopt a conservative approach and presume that franchisors will be liable unless this can be proven otherwise.

We recommend that all franchisors adopt a ‘reasonable steps compliance plan’ which might involve some or all of the following, depending on the circumstances:

1- A system-wide memo sent to all franchisees. This should explain and emphasise that the correct engagement of employees and compliance with workplace laws is the responsibility of the franchisee. It should remind franchisees of their obligation to comply with workplace laws such as correct classification of employees, correct payment of wages, compliance with any applicable modern award or industrial instrument and relevant legislation, correct payment of entitlements (PAYG taxes, leave, superannuation, etc), compliance with any visas for migrant workers and record-keeping obligations.

2- Reviewing standard-form franchise agreements and operations manuals to clearly set out the obligations of franchisees under workplace laws.

3- Regular and active monitoring franchisees, and if warranted, carrying out targeted or random field visits and compliance audits (complying of course with any process to be followed under the existing franchise agreement). Sending out questionnaires for completion by franchisees is another important step in active monitoring. Regular audits following the return of questionnaires may act as a deterrent to other franchisees who will be aware that audits are commonplace and that consequences for non-compliance with workplace laws are enforced.

4- Checking what modern awards or industrial instruments are applicable to the particular industry for the purpose of self-education and educating franchisees and employees.

5- Obtaining advice from third party consultants where required.

6- Reviewing or developing policies (covering such things as workplace bullying, sexual harassment, discrimination and privacy), information kits, checklists and other resources for franchisees. This doesn’t mean franchisors must take out their own exhaustive review of all workplace laws. However, the resources need to be enough to make the franchisee consider what needs to be taken into account and complied with. It should aim to point them in the right direction. The medium could be transmission through the franchisor’s internal intranet system or a link to a webinar. The Fair Work Ombudsman’s website has some useful online resources and training material as a starting point. We also recommend franchisors provide all franchisees with a copy of or link to the Fair Work Ombudsman’s Fair Work Handbook which they should be required to read and familiarise themselves with.

7- Reviewing or developing internal policies, educational resources and online/inhouse training for the franchisor’s own staff to know what to look for and to know what to say when presented with an employment related enquiry from a franchisee or one of their employees.

8- Reviewing the initial, ongoing and refresher training provided to new and existing franchisees to include workplace law compliance strategies. This could be incorporated into the induction process for new franchisees.

9- Depending on the franchisor’s rights under the applicable franchise agreement, requiring franchisees to complete online Fair Work training programs and provide completion certificates to the franchisor.

10- Encouraging feedback as both franchisees and their employees should feel comfortable approaching a franchisor in respect to issues with the system. Employees should not feel that they are prevented from raising employment concerns with the franchisor. There should be an agreed point of contact within the franchisor’s organisation (whether an individual, phone hotline or email address) by which franchisees and their employees can raise concerns.

11- Listening to concerns that franchisees or their employees raise regarding the system and developing internal reporting processes to manage concerns. Franchisors shouldn’t ignore issues. It is in a franchisor’s best interest to ensure that franchisees are operating their businesses adequately and in compliance with workplace laws. If franchisees are struggling to pay their employees the proper entitlements, and if this is a widespread concern, that could indicate the need to review the structure of the franchise system.

12- Treating franchisees with uniformity. Franchisors could be accused of breaching their good faith obligations under the Franchising Code of Conduct if they single out a particular franchisee. If audits are to be carried out and consequences for non-compliance enforced, then all franchisees should be treated equally.

13- Developing a process for the franchisor to follow when addressing alleged employee underpayments and contraventions of workplace laws.

14- Developing resources for the franchisor’s own staff and franchisees setting out how to respond to a request or investigation by the Fair Work Ombudsman, for example, FAQs or guidelines. It is important that franchisees are aware of their legal obligations in that regard and the powers of Fair Work Ombudsman inspectors.

15- If franchisors have any suspicions about a breach of workplace laws, taking immediate action and being on the forefront.

Simply referring franchisees to the Fair Work Handbook will not itself be sufficient to demonstrate the franchisor has taken ‘reasonable steps’.

Takeaways

If franchisors don’t have a reasonable steps compliance plan, then they expose themselves and their franchise system to liability.

If franchisees know that franchisors are serious about enforcement, then that may be more incentive for franchisees to carry out their own internal reviews into whether they are compliant and to be proactive in compliance.

Franchisees and franchisors must also be prepared to face tougher financial penalties for breaching workplace laws. These are now significant. In some cases, the penalties will be up to $630,000 for corporations (i.e. operating as a company) and $126,000 for individuals (i.e. operating as a sole trader, or people who are decision makers in a company, for example an officer/director or HR manager). These penalties apply per breach, meaning if two employees are underpaid then there could be multiple breaches and multiple penalties.

Usually there are multiple breaches of the Act for underpayment and non-compliance offences, so non-compliance is expected to be a very expensive exercise going forward. We expect the Fair Work Ombudsman and inspection activity and prosecutions to significantly increase and the fines imposed by the courts to continue to significantly increase as well.  We have already seen this in the most recent decisions being handed down. We are also seeing the move toward making the individuals involved in non-compliance liable, including directors, officers, HR managers, payroll providers and most recently third party professional services advisors, including accountants and payroll providers.

Deliberately underpaying employees or retaining false records may also constitute fraudulent conduct in certain circumstances, entitling a franchisor to immediately terminate a franchise agreement, or at the very least, acting as grounds for a breach notice to be issued (depending on the provisions of the applicable franchise agreement).

At Rouse Lawyers we can speak with franchisors to assess whether they are engaging in any operational activities which may indicate a ‘degree of influence or control’ over franchisees. This can involve an examination of the franchisor’s general systems and procedures for dealing with franchisees. We can also assist franchisees who may have concerns regarding compliance and the engagement of their employees.

As the recent 7-Eleven scandal has shown, if the media were to discover a contravention of workplace laws, then this can put a negative spotlight on a franchise system and cause irreparable reputational damage. Franchisors and franchisees have no control over what the media says once a story hits the news. The Fair Work Ombudsman could also take action to name and shame or prosecute the franchisee and/or franchisor and the business.

If you have any concerns about compliance, the underpayment of employees or questions about the new laws, please get in touch with one of our lawyers. We have dedicated franchise and employment law teams that can assist.

Need advice?  Talk to the Franchising team at Rouse Lawyers. Contact us today!

What is the Franchising Code of Conduct?

This article was previously published on the Inside Franchise Business website.

The Franchising Code of Conduct is a mandatory industry code. It contains a process to determine what constitutes a franchise agreement, and regulates the conduct of franchisors and franchisees towards each other.

The Code has been in force since 1 October 1998 and it sits within the Competition and Consumer Act 2010. A revised version was introduced on 1 January 2015 which governs all franchise agreements entered into, renewed, extended or varied on or after that date. Some conduct under franchise agreements entered into before 1 January 2015 will continue to be governed by the former Code.

The Code can be found on the website of the Australian Competition and Consumer Commission (ACCC).

How the Code affects you

The Code sets out obligations and procedures which must be followed and cannot be waived. Some of these include:

1. The franchisor must maintain a disclosure document in a prescribed format containing information about the franchise system. It must be updated annually and must include details about current and former franchisees, all costs you can expect to incur during the course of the franchise and any litigation that the franchisor is involved in.

2. A current disclosure document must be given to you along with a copy of the proposed franchise agreement and a copy of the Code at least 14 days before a franchise agreement is entered into.

3. You are granted a seven day cooling off period after entering into a franchise agreement, except on renewals, variations or transfers of existing franchise agreements.

4. Before entering a franchise agreement, you must give the franchisor a statement about whether or not you received legal, accounting and business advice. It is not mandatory for you to obtain this advice, but you do need to tell the franchisor if you did.

5. There are rules governing how a franchisor can operate a marketing fund. Franchisors must be transparent about what they use the fund for and provide you with annual statements.

6. Franchisors are subject to certain restrictions when requiring you to undertake significant capital expenditure (such as store and equipment upgrades).

7. Franchisors must give notice requiring breaches to be remedied and give a reasonable time (no longer than 30 days) to remedy a breach before terminating the franchise agreement. There are limited circumstances where this does not apply and the franchisor can terminate your agreement immediately, for example, if you become bankrupt, act fraudulently or endanger public health and safety.

8. There are processes to be followed for the resolution of disputes, which include mediation.

9. There is an obligation for franchisors and franchisees to act in good faith in their dealings with each other. This does not though restrict either of you from acting in your genuine commercial interests.

Why does the Code exist?

The purpose of the Code is to even-out the power imbalance which exists in a franchise relationship. Franchisors generally have the greater share of power in the relationship, so the Code places limits on this power, but at the same time ensures both franchisors and franchisees act fairly.

The Code also endeavours to ensure that you are made aware that signing up to a franchise is a significant commitment and that you are provided with the right information to make an informed decision as to whether a franchise model is the right choice for you.

Breaching the Code

The responsibility of enforcing the Code rests with the ACCC. Any breach of the Code is also a breach of the Competition and Consumer Act.

Breaches of some provisions will attract penalties of up to $63,000 in each instance, and these breaches may lead to infringement notices issued by the ACCC for $10,500 per breach.

Compliance with the Code must therefore be taken seriously by all parties to a franchise agreement.

Need advice ?  Talk to the Franchising team at Rouse Lawyers. Contact us today!

Why Won’t Twitter #BanTrump?

By Christina Krantz and David Rose

Happy new year from Rouse Lawyers! We’re less than two weeks in, and 2018 already looks a bizarre, parallel universe. The Hottest 100 has changed dates, the weather is warmer than ever, and the President of the United States is in a button-measuring contest with North Korea. Did we accidentally ingest something at the New Year’s party, or is this reality now?

President Trump’s most recent outburst has prompted some people to ask why Twitter allows him on their platform at all. Activists have targeted Twitter’s CEO, Jack Dorsey, claiming that he is “complicit” in “endanger[ing] the world”. The movement is backed by thousands of Twitter users, many of whom believe that Trump is in violation of the Twitter Rules. It seems like everybody’s asking the same question: why doesn’t Twitter just ban Donald Trump?

Money

One of the more cynical answers is that Trump is a money-maker for Twitter. It’s hard to know exactly how many people use Twitter, but estimates put the number at around 125 million. To put that in perspective, Trump’s feed alone has 46.4 million subscribers. That’s 37% of all Twitter users, without counting those of us who read his tweets in the newspaper, or on Facebook. If Twitter were to ban Trump, experts estimate they could lose up to two billion dollars. The President may be stupid, but Twitter certainly isn’t. They won’t kill their cash-cow without a good reason.

The President Can’t Break the Rules

Unfortunately for those who dislike Trump’s Twitter rants, it has emerged that he, quite literally, cannot be in breach of Twitter’s rules. Much like Trump himself, the reason for this is pretty simple: he’s a world leader. On Jan 5^th, Twitter announced that they would exempt world leaders from the rules that govern their other users. Twitter’s argument is that blocking world leaders from Twitter would be damaging to global discussion. Therefore, Trump (and all other leaders) cannot be in breach of the Twitter rulebook. It’s worth noting that in the 21^st century, Twitter isn’t too dissimilar from television, or newspapers. Nobody would complain about a news agency giving a platform to a Trump by printing his comments or airing them. Twitter could be said to occupy a similar space.

Could the Public Force Trump Offline?

Forcing Trump off Twitter isn’t something the public can do unless an angry mob of computer programmers storms the Twitter offices. The main reason for this is the doctrine of privity of contract. “Privity of contract” is a simple, yet powerful idea. Under this rule, only people who have signed a contract can exercise their rights under it. When the President signed up with Twitter, he didn’t make a contract with the entire world; he made a contract with Twitter. Accordingly, even if he breaks every one of Twitter’s rules, in the end, he’s only answerable to Twitter. The public simply don’t get a say in Donald Trump’s contract with Twitter.

The other reason that Trump won’t be kicked off is that Twitter has repeatedly decided to continue enforcing their contract with him. Under standard contract law, when a party breaches a contract, the contract does not cease to exist. Rather, the other party gets to decide what to do with the contract. Unless the breach is so serious that it prevents the contract being enforced at all, the other party can decide to continue enforcing the contract. Alternatively, they can decide to terminate it due to the beach.

When faced with Trump’s alleged breaches, Twitter has elected to stay silent, and allowed Donald Trump to continue using their platform. Some people would consider this a decision to continue enforcing the contract. Of course, saying nothing at all isn’t conclusive proof of anything. This isn’t a Ronan Keating song. Let’s take an Australian approach.

The Australian Approach

Under Australian law, you’re required to give objective, unequivocal words or conduct which indicate how you’re going to respond to a breach. Twitter’s World Leader policy has certainly done that, in our view. Twitter has given an unequivocal statement that Trump is welcome on their platform. From an Australian legal perspective, there’s little doubt that the contract between them is still on-foot. Accordingly, it’s likely that Twitter will allow Trump to stay for as long as he’s President.