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If you are looking to buy, start or sell a franchise in New Zealand, you should become familiar with the Franchise Association of New Zealand’s Code of Practice. The Franchise Association of New Zealand (FANZ) is the peak body for franchising in New Zealand. It helps set guidelines for best franchising practices. Even though it is not a legal requirement to join FANZ, it is a good idea to join. This is because it will provide access to their resources and boost your reputation. As a member of FANZ, you must adhere to their Code of Practice (the Code). This helps to regulate the franchising process in New Zealand. This article will discuss:

  • your rights under the Code; and 
  • how to make sure that you are following your obligations. 

What Is the Franchising New Zealand Code of Practice?

FANZ defines the purpose of the Code as: “to promote high standards of Franchising conduct and procedure in accordance with the objects of the Association”. This is to help make sure that all parties in a franchising agreement are treated fairly. 

Have a Cooling-Off Period

Under the Code, all franchise agreements must have a cooling-off period. A cooling-off period is a timeframe in which a franchisee can withdraw from their franchise agreement after they have signed it. This is so franchisees are not bound to the agreement if they feel rushed into it. The Code requires the cooling-off period to be at least seven days from when the party signed the agreement. If a franchisee activates this provision, then they are immediately unbound from all provisions in the agreement other than those relating to confidentiality and intellectual property.  

However, it is essential to note that if you are granted a franchise through an assignment, there is no requirement for a cooling-off period.

Provide a Franchise Disclosure Document

As a franchisor, you must also provide your prospective franchisees with a disclosure document under the Code. A disclosure document contains any information about the current franchisor/franchisee relationship and gives the franchisee the necessary information to make an informed decision. The disclosure document should specifically contain:

  • an outline of the system;
  • intellectual property particulars;
  • details of franchise fees;
  • supplier and distributor terms;
  • relevant financial information;
  • conditions relating to termination, assignment and renewal;
  • any refundable payments; and
  • summary of the obligations of the franchisor.

The Code requires that a franchise disclosure document be updated annually and that all prospective franchisees must receive a copy 14 days prior to the signing of the franchise agreement. 

Dispute Resolution Practices

Under the Code, all franchise agreements must contain a provision that allows for dispute resolution practices to be undertaken in the event of a dispute arising. Further, the Code outlines the process for resolving a dispute without having to resort to court proceedings. 

If a dispute takes place between the franchisor and the franchisee, the parties should strive to resolve this through negotiation. However, if within 21 days of the dispute arising, the dispute is still not resolved, either party can write to have the dispute resolved by mediation. Mediation is a dispute resolution process in which a neutral third party helps the parties resolve their dispute. If, within 45 days of referral to mediation, the parties have still not resolved their issue, then either party may commence court proceedings.

Other Obligations

As a member of FANZ, you must supply your franchisee with the Code of Practice and the Code of Ethics at least seven days before the signing of the franchise agreement. All franchise agreements must also have provisions that require both the franchisor and the franchisee to comply with both codes.

Key Takeaways 

Joining the Franchise Association of New Zealand is a great way to boost your reputation as either a franchisor or a franchisee in New Zealand. Additionally, it allows you to use their helpful resources and gives you the opportunity to connect and network with other people in the franchising community. As a member of FANZ, you are bound by their Code of Practice. The Code helps regulate the relationship between a franchisee and franchisor whilst maintaining the rights of either party. Some of the things that the Code requires includes:

  • a cooling-off period for new franchise agreements;
  • a franchise disclosure document to be given to franchisees;
  • dispute resolution practices; and
  • other obligations.

If you are looking to join FANZ, head to their website and fill out the application form. If you are looking to buy, start or sell a franchise in New Zealand, contact LegalVision’s franchise lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Do I have to join the Franchise Association of New Zealand?

No, but it is a great way to boost your reputation and get to know others in the franchising community.

What happens if I do not follow the Code of Practice?

You may be kicked out of FANZ, and your name in the franchising community may be tarnished.

Do I have to go through the dispute resolution process before I can commence court proceedings?

If you are a member of FANZ, then under their code of practice, you must go through dispute resolution first. This is to help solve the dispute without having to rely on a costly legal process. 

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