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I.Introduction
Franchising is developing in New Zealand at a very fast rate. Some people may wonder exactly what franchising is. It is also fair to say that some people use the term loosely and in the wrong context.
Quite simply, franchising is a method of marketing goods and services. It has evolved out of a number of business transactions, methods, and practices which have been common and popularly known for many years. As a legal and marketing concept, it is not new.
In 2017, Massey University and Griffith University conducted a survey of New Zealand franchising1 and some highlights from that survey are as follows:
* The number of business format franchise systems operating in New Zealand has increased, with 631 business format franchise systems operating in New Zealand, compared with 446 in 2012.
* The survey estimated that franchised businesses contribute around NZ$27.6 billion to the New Zealand economy.
* The number of units operating with business format franchise systems has also increased, with an estimated 37,000 units compared with 23,600 in 2012.
* There are an estimated 124,200 employees of New Zealand business format franchise systems, up from 80,400 in 2012, with approximately sixty percent of employees in permanent full-time employment.
* Franchising covers a wide range of industry categories and subsectors. Predominant sectors included "retail trade" (twenty-three percent), "other services" (twenty percent), "accommodation and food retail" (eighteen percent) and "administration and support services" (eight percent).
* The median total start-up cost for a franchisee was $308,500 for retail and $87,550 for non-retail.
* The median initial franchise fee was $35,000.
* Fifty percent of franchise systems have been operating since before 2000.
* Median time before franchising is four and a half years. Thirty-six percent are franchised within first year.
* The overall level of disputes per franchise unit was low (1.9 percent). Only twentytwo percent of franchisors experienced a substantial dispute with a franchisee within the last twelve months. The most common action was mediation (fortynine percent), followed by correspondence via a solicitor (fortyone percent). There was little incidence of litigation (ten percent) where substantial disputes occurred.
II.Legal Landscape in New Zealand
Although there are no specific franchising laws in New Zealand, existing laws protect franchisees such as the Fair Trading...