Franchising Code of Conduct Quiz
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Questions and Answers

What is the civil penalty for non-compliance as stated in the content?

  • 600 penalty units (correct)
  • 400 penalty units
  • 200 penalty units
  • 800 penalty units

    • What does the obligation to act in good faith allow a party in a franchise agreement to do?

  • Transfer their obligations to another party
  • Act against their commercial interests
  • Act in their legitimate commercial interests (correct)
  • Ignore the franchise agreement terms

    • Which of the following does NOT imply that a franchisor acted in good faith?

  • The franchisor complies with disclosure requirements
  • The franchisor provides a fair disclosure document
  • The franchisee doesn't have an option to renew (correct)
  • The franchisee cannot extend the agreement (correct)

    • What is the purpose of a disclosure document in a franchise agreement?

    <p>To inform the franchisee about the franchise</p> Signup and view all the answers

    Which of the following entities is exempt from complying with the disclosure requirements?

    <p>Master franchisors relating to subfranchisees</p> Signup and view all the answers

    What is the main purpose of the Franchising Code of Conduct?

    <p>To regulate the conduct of participants in franchising</p> Signup and view all the answers

    When does the Franchising Code apply to conduct?

    <p>To conduct occurring on or after 1 January 2015</p> Signup and view all the answers

    What condition could allow a franchise agreement to not fall under the code?

    <p>Sales under the franchise exceed 20% of the franchisee's gross turnover</p> Signup and view all the answers

    Which of the following is a condition for the Franchising Code not to apply?

    <p>The agreement is for goods not previously supplied by the franchisee</p> Signup and view all the answers

    What is defined as the 'old code' in the Franchising Code of Conduct?

    <p>The previous version of the Franchising Code before 2015</p> Signup and view all the answers

    What happens to the provisions of the code if a franchise agreement is varied after 1 January 2015?

    <p>The provisions cease to apply</p> Signup and view all the answers

    What is one of the criteria for determining if a franchise agreement is covered by the code?

    <p>The franchise agreement should be entered into after 1 October 1998</p> Signup and view all the answers

    How is the percentage of gross turnover significant under the Franchising Code?

    <p>It indicates if the code applies to the franchise agreement</p> Signup and view all the answers

    Which of the following is NOT considered a motor vehicle?

    <p>bicycle</p> Signup and view all the answers

    What does the term 'motor vehicle dealership' include?

    <p>Any business of buying or selling motor vehicles</p> Signup and view all the answers

    Which type of vehicle does the term 'new passenger vehicle' refer to?

    <p>New road vehicles as defined in specific regulations</p> Signup and view all the answers

    What is meant by 'obligation to act in good faith'?

    <p>A requirement within a franchise agreement's clause</p> Signup and view all the answers

    What does the term 'serious offence' refer to?

    <p>An offence punishable with at least 5 years imprisonment</p> Signup and view all the answers

    Which of the following is NOT included in the definition of 'trade mark'?

    <p>Cooking recipes</p> Signup and view all the answers

    What is a 'subfranchisor'?

    <p>A franchisee also acting as a franchisor under the master franchise</p> Signup and view all the answers

    What does 'renew' mean in the context of franchise agreements?

    <p>To extend an existing franchise agreement</p> Signup and view all the answers

    What is 'virtual attendance technology' used for?

    <p>Participating in arbitration remotely</p> Signup and view all the answers

    What does the 'Franchise Disclosure Register' entail?

    <p>A record of franchisors and franchisees</p> Signup and view all the answers

    What is the primary purpose of a franchise agreement?

    <p>To grant the franchisee the right to operate under the franchisor's branding</p> Signup and view all the answers

    Which of the following is NOT a form of franchise agreement?

    <p>Subscription agreement</p> Signup and view all the answers

    Which of these fees is generally included in a franchise agreement?

    <p>Initial capital investment fee</p> Signup and view all the answers

    What does a franchisor need to avoid in a franchise agreement?

    <p>Including provisions limiting the obligation to act in good faith</p> Signup and view all the answers

    Which of the following constitutes a franchise agreement?

    <p>A motor vehicle dealership agreement</p> Signup and view all the answers

    What is required of each party to a franchise agreement concerning good faith?

    <p>To act in good faith concerning the agreement</p> Signup and view all the answers

    What does the amount of civil penalty for a body corporate contravening certain provisions depend on?

    <p>The annual turnover of the business</p> Signup and view all the answers

    Which situation does NOT constitute a franchise agreement?

    <p>A mortgagor and mortgagee relationship</p> Signup and view all the answers

    How is the amount of civil penalty calculated when the benefit from a contravention cannot be determined?

    <p>10% of the annual turnover during the last 12 months</p> Signup and view all the answers

    What is one factor a court may consider when evaluating good faith in franchise agreements?

    <p>Whether the party cooperated to achieve the agreement's purposes</p> Signup and view all the answers

    Which statement is true regarding the obligations of a franchisor?

    <p>Franchisors must ensure fair and reasonable terms in agreements</p> Signup and view all the answers

    What type of entity is specifically included as an example of franchises?

    <p>Small proprietary company</p> Signup and view all the answers

    What defines an implied franchise agreement?

    <p>An agreement based on actions and circumstances</p> Signup and view all the answers

    What can trigger a civil penalty under the Corporations Act 2001?

    <p>Substantial contraventions of specified provisions</p> Signup and view all the answers

    What kind of penalty units are associated with the obligation to act in good faith?

    <p>600 penalty units</p> Signup and view all the answers

    What type of agreement does the 3A Code not apply to regarding certain co-operatives or mutual entities?

    <p>Franchise agreements within co-operatives or mutual entities</p> Signup and view all the answers

    Which of the following is a context that would exempt a franchisee from the 3A Code?

    <p>Being a member of a co-operative on the National Law register</p> Signup and view all the answers

    Which document provides the definition of 'ABN' as referred to in the code?

    <p>A New Tax System (Australian Business Number) Act 1999</p> Signup and view all the answers

    Which definition relates to a conciliator or mediator in the code?

    <p>ADR practitioner</p> Signup and view all the answers

    What constitutes the definition of a 'franchise' according to the described codes?

    <p>Rights and obligations under a franchise agreement and interests</p> Signup and view all the answers

    In the code, who is considered an 'associate' for a franchisor?

    <p>A person who has a relevant relationship with the franchisor</p> Signup and view all the answers

    What does 'engage in conduct' mean in the context of the code?

    <p>To perform a specified act or to avoid doing something</p> Signup and view all the answers

    How is the term 'franchisor' defined in the code?

    <p>Any person who grants or participates in a franchise</p> Signup and view all the answers

    What type of document is a 'disclosure document' according to the code?

    <p>A document required by clause 8 of the code</p> Signup and view all the answers

    Which of the following does NOT apply to the definition of 'financial year' in relation to a franchisor?

    <p>A period agreed upon by franchisor and franchisee</p> Signup and view all the answers

    What is the primary function of a 'master franchise'?

    <p>To allow the subfranchisor to grant subfranchises</p> Signup and view all the answers

    Which of the following clearly defines what 'interest in a franchise' includes?

    <p>Legal or beneficial interest in various franchise-related entities</p> Signup and view all the answers

    Which type of vehicle does NOT qualify as a 'motor vehicle' according to the code?

    <p>A bicycle powered by pedaling</p> Signup and view all the answers

    What is a requirement for a franchisee to enjoy exemption under the 3A Code with mutual entities?

    <p>Possessing full voting rights</p> Signup and view all the answers

    Which of the following does NOT describe a 'franchise agreement'?

    <p>An informal agreement between partners</p> Signup and view all the answers

    Study Notes

    Franchising Code of Conduct Overview

    • The Franchising Code of Conduct regulates conduct among participants in franchising relationships.
    • Effective from January 1, 2015, applicable to franchise agreements made after October 1, 1998.

    Applicability and Exemptions

    • The code does not apply to agreements under other mandatory codes or where the franchisee has supplied similar goods/services for at least two years prior.
    • Exemptions also exist for franchise agreements involving co-operatives or mutual entities.

    Key Definitions

    • Franchise Agreement: Legal agreement granting a franchisee rights to operate a business under a defined system.
    • Franchisor & Franchisee: Franchisor grants the franchise, while the franchisee operates the business based on franchisor's terms.
    • Master Franchise: A franchising arrangement where the franchisor grants rights to a subfranchisor to grant subfranchises.

    Obligation to Act in Good Faith

    • All parties in a franchise agreement must conduct themselves with good faith.
    • Breach of this obligation can incur civil penalties up to 600 penalty units.

    Disclosure Requirements

    • Franchisors must maintain a comprehensive disclosure document for potential franchisees.
    • This document facilitates informed decision-making before signing agreements.

    Civil Penalties

    • Serious contraventions of the code can result in civil penalties as high as $10,000,000 or three times the benefit gained from the contravention.

    ADR Processes and Technology

    • Alternatives to litigation such as mediation or conciliation are encouraged.
    • Virtual attendance technologies allowed for ADR processes.

    Key Relationships and Agreements

    • The code outlines that relationships such as employer-employee or landlord-tenant do not constitute franchise agreements.
    • Motor vehicle dealership agreements are classified under franchise agreements.

    Importance of Compliance

    • Non-compliance with the code leads to significant penalties and undermines the integrity of franchising practices, ensuring fair treatment within franchising networks.

    Amendments and Variations

    • Changes to existing agreements on or after January 1, 2015, bring them under the current code's provisions.

    Key Terms and Entities

    • Ombudsman: Refers to the Australian Small Business and Family Enterprise Ombudsman involved in resolving franchise disputes.
    • Disclosure Document: Legal requirement to inform prospective franchisees about the franchise and its operations.

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    Description

    Test your knowledge on the Franchising Code of Conduct as outlined in the Competition and Consumer (Industry Codes--Franchising) Regulation 2014. This quiz covers the key aspects and regulations that govern franchising practices. Perfect for participants and regulators in the franchising industry.

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