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WA Commercial Law - Are We a Franchise?

Discussion in 'Commercial Law Forum' started by Hamster, 10 February 2016.

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  1. Hamster

    Hamster Member

    10 February 2016
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    I am in the process of setting up an independent driving school. The idea is to set up a business infrastructure that I use to schedule lessons, take payments, market the business, etc. I will then allow colleagues of mine, functioning as independent instructors, to use these systems as well, marketing themselves under my business name, logo, etc.

    Some of the operating principles are:

    • They will pay me a monthly fee for doing this, but no upfront fee to join.
    • We will all have the same lesson prices, although each individual instructor can offer cash discounts on their own.
    • We will all use the same promotional material towards students and the market, plus a common set of values.
    • The student will contract directly with the individual instructor, not with my company (this will clear in the student agreement).
    • We will have a common phone number new students can call. I will then allocate them an instructor serving their area. Instructors can also recruit their own students, but not "steal" them from other instructors.
    • We will have a recommended area from where instructors can recruit students.
    • Each instructor manages their own lesson bookings through the common scheduling systems.

    I will not take a cut of, or account for, the money they make for lessons. Any online payments will be moved through our payment provider directly to the instructor. They are responsible for their own bookkeeping and GST

    When looking at the most appropriate business structure, I released that I am probably looking at a Franchise setup, where I am the Franchisor and all other instructors Franchisees. The reason being:

    • We operate under a common marketing scheme and price schedule
    • I want everyone to share the same values and act the same towards students and reserve the right to terminate their agreement if they do not comply (e.g have a quality framework for all to follow)
    • They pay me a fee to use the services
    • I will do most of the marketing but recommend they promote the business as well and recruit new instructors, etc.

    So, my question is, is there any other association form I can use to achieve this other than a Franchise (e.g. user license, distributor, contractor etc) under Commercial Law? I don't want a shared ownership, etc, only independent contractors operating on their own without me having to account for them, pay them, etc.

    The reason being to avoid the copious amount of documents I'm currently having to produce (started and getting there) as a franchise (Franchise Agreement, Disclosure Statement, Operations Manual, etc)? Especially the Disclosure statement with its audit requirements, etc. will be a pain to maintain. I still need an ops manual and a contract with each instructor anyway of course, but a Franchise setup is so formal.
  2. James D. Ford - Solicitor

    James D. Ford - Solicitor Well-Known Member

    19 June 2014
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    Hi Hamster

    Here is the legal definition of a Franchise Agreement:

    5 Meaning of franchise agreement

    (1) A franchise agreement is an agreement:

    (a) that takes the form, in whole or part, of any of the following:

    (i) a written agreement;

    (ii) an oral agreement;

    (iii) an implied agreement; and

    (b) in which a person (the franchisor) grants to another person (the franchisee) the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor or an associate of the franchisor; and

    (c) under which the operation of the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol:

    (i) owned, used or licensed by the franchisor or an associate of the franchisor; or

    (ii) specified by the franchisor or an associate of the franchisor; and

    (d) under which, before starting or continuing the business, the franchisee must pay or agree to pay to the franchisor or an associate of the franchisor an amount including, for example:

    (i) an initial capital investment fee; or

    (ii) a payment for goods or services; or

    (iii) a fee based on a percentage of gross or net income whether or not called a royalty or franchise service fee; or

    (iv) a training fee or training school fee;

    but excluding:

    (v) payment for goods and services supplied on a genuine wholesale basis; or

    (vi) repayment by the franchisee of a loan from the franchisor or an associate of the franchisor; or

    (vii) payment for goods taken on consignment and supplied on a genuine wholesale basis; or

    (viii) payment of market value for purchase or lease of real property, fixtures, equipment or supplies needed to start business or to continue business under the franchise agreement.

    Kind regards

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