Australia s evolving franchising laws: help or hindrance? Australia's franchise law is to apply to foreign franchisors. Should this be a concern?

Australia has traditionally been an attractive market for international franchise systems, specially from the United States. The reasons for this include a similar language and culture, a growing economy and, importantly, a business community which has embraced franchising, which have outweighed the challenges of a smaller population, the tyranny of distance and unfriendly time zones.

That franchising has thrived in Australia cannot be contested. The first major U.S. franchise companies that entered the Australian market in the late 1970s remain, the local franchise association was established in 1983 and a 2006 survey by Griffith University estimated that more than 960 franchise systems operate in the country, 93 percent of these being Australian-based. The same survey noted that 24 franchise companies appeared in a list of the top 500 Australian private companies and more than one-quarter of Australian systems now franchise internationally. Demonstrating the industry's maturity, an increasing number of these are publicly-traded. Despite the language barriers, but perhaps due to the geographic proximity, a number of Australian franchise system are now venturing to Singapore, Malaysia, China and Hong Kong, as well as to the more traditional markets of New Zealand and the United Kingdom. Increasingly, Australia, with its stable economic and political environment and relatively-low costs, is used by international businesses as their Asia-Pacific headquarters.

Have Australia's laws hindered franchising's progress?

Within Australia, as elsewhere, any international business needs to do its homework to check that its goods or services can be exported and marketed in a cost-efficient manner and without material change. Similarly, all agreements to be used in Australia need to be reviewed to determine whether any changes are required or advisable for their use.

Australia's laws have not, to date, contained barriers to entry for foreign franchise systems. While Australia has a federal system, this does not create the challenge to franchising that it does in the United States. Australia has no registration or approval requirements for franchise agreements. It has no layer of "business opportunity" laws which might also apply. It has no barrier to commencing discussions with a potential franchisee which can be caused by a "first personal meeting" disclosure trigger, such as has been the case in the United States. In fact, as discussed below, international franchise companies have enjoyed a special status under Australian law. That is about to change.