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VIC Business Name and Franchise Non-compete Clause Queries

Discussion in 'Commercial Law Forum' started by Xatox, 26 November 2015.

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  1. Xatox

    Xatox Member

    26 November 2015
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    Hey guys,

    I wanted to find out if I would be able to go ahead and find my own clients with my own business name? The Franchise agreement did state that I can't compete directly with them while using their mark or taking the clients off their hands or certain km away from your job site.

    I have only been in the franchise business for about 4 months now, and I have yet to make the money that was written in the agreement. Where do I stand in this situation?

    Say I wanted to leave the franchise due to them not providing me with the set income I initially paid for to buy the new franchise, will this be possible?

    On the agreement, it does state "Nothing in this clause will prevent the franchisee engaging in competition" although it does have it's non-compete clauses printed there.

    Worse case: I also wanted to know since I have family working with me, is it possible for them to get the client with their business name if they did not sign anything with the master franchisor?

    I worry too much about this, I don't like to be cheated so to speak.

    Thanks for any information.
  2. Sophea

    Sophea Well-Known Member

    16 April 2014
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    You must comply with the restraint of trade clauses in your contract. Depending on the precise terms of the agreement that would usually mean that you cannot set up a business in direct competition with the franchise either within a certain no. of km of the franchise or at all. You are still however able to set up a business if it is not in the same industry or selling the same goods or services as the franchise.

    If one of your family members wanted to set up a business in competition then that would normally be okay as they are not bound by the franchise agreement, unless they are current employees and they have signed an employment contract which restricts their future business activities. You would need to make sure that you were not involved in this business venture at all, as it may put you in breach of the franchise agreement.

    Trying to get out of a franchise agreement because you are not making the income promised is quite a common thing. However, unless you can point to specific false representations that were made by the other party which induced you to enter the agreement, then you will not be able to get out of the agreement or gain compensation.

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