Therefore, if there are appropriate alternative contractual mechanisms within the framework of the franchise agreement, the commercial clause may be considered inappropriate, with the exception of the limitation of the commercial clause that protects the interests of the value or confidentiality of the information provided by the franchisor. In New Zealand, however, there have recently been a number of high-level trials that have dealt specifically with this issue. It would be fair to say that the two did not end very well for the franchisee. In the case of the sale of a business and its value, the deduction is considered more favourable than an employee-employer ratio. The Court found that the limitation to three criteria was appropriate: it is customary for cascading provisions to be included in the limitation of trade clauses. A cascading provision is a provision that includes a number of alternatives, usually in terms of time (for example. B 2 years, 1 year, 6 months) and area (for example. B Australia, State, Territory). With respect to the assessment of adequacy, it was found that courts have generally taken a conservative approach to assessing the appropriateness of a restriction in the case of the sale of a business context, as opposed to an employment contract, for example, because of greater inequality in bargaining power. However, both parties were legally represented in this area, so no issue of unequal bargaining power was considered to be fulfilled.
As a general rule, these clauses can only be implemented if they are considered, at the time of the franchise agreement, as an appropriate means of protecting the franchisor`s value. The message of these two cases is that a franchisee must, when entering into a franchise agreement, do so with an open mind and after taking into account all problems, including an appropriate exit strategy from the outset. The franchisee had two video libraries that he turned into blockbuster franchises. When the franchise agreements ended, the franchisee removed the identity cards and continued to operate independent video libraries. Blockbuster attempted to impose the limitation of commercial clauses in the franchise agreement. The Tribunal found that Blockbuster did not have sufficient business or goodwill in the branches, as it was already good in the branches prior to the conclusion of franchise agreements with blockbuster, in order to ensure protection. The Court also found that the intellectual property of the blockbusters was sufficiently protected by other clauses in the franchise agreement. A franchisee can negotiate an authorization even if the franchise agreement has an appropriate restriction clause. If you do, you document the results of this negotiation in a formal transaction agreement.
Even if a franchisor declares that it will not prevent a franchisee from operating outside the system, a formal agreement ensures that the franchisor cannot assert the right to a violation of the restriction. If you are a franchisee and are considering leaving the franchise, it is important to note that there are restrictions on what you can do next. These restrictions are usually in the form of a restriction. You asked if you can do that: even if a restriction clause is not considered ineffective under section 23 of the franchising code of conduct, it still cannot be enforced. The adequacy of the withholding is determined by taking into account the interests of the franchised parties: the deduction must offer only adequate protection to the franchisor and must not prejudice the public. Such clauses are valid and applicable only if the deference is appropriate.