Wendys Master Franchisor

In July 2015 there was media coverage of Wendy's in connection with a company that previously owned the master franchise in Australia being placed into Voluntary Administration. Following is an article which sheds some light on the situation. It has been written by Shabnam Amirbeaggi who is a liquidator and insolvency expert. Shabnam is  a member of the Franchise Accountants Network and a Managing Partner at Crouch Amirbeaggi.

For those who may have heard a rumour about Wendys being in trouble, it’s not quite as dramatic as it may first sound. Yes it’s true, the company that originally owned the master franchise has been placed into voluntary administration, but Wendys as a brand will live on to see another day.

Wendys master franchisor, established in 1979 in South Australia, sold its brand about 12 months ago to a Singapore based company, Supatreats Australia. Since then franchisees have been negotiating a new agreement with the new franchisor.

Franchise agreements are not usually drafted to cater for the franchisors’ insolvency; and are more often than not drafted with clauses to deal with the franchisees’ possible financial demise. Consequently, it is likely that the franchisees who haven’t reached an agreement with Supatreats Australia are facing possible closure of their stores as they will no longer be able to trade under the Wendys brand. If they fail to sign up with the new master franchisor, the franchisees livelihood will be determined by their ability to cover the costs associated with de-identifying the business and continuing to operate independently, or if possible converting to a like-minded franchise – all of which are subject to the landlord’s consent and ability to negotiate new lease terms where applicable.

FAN members with a franchisee clients should bear in mind that even whilst the franchisee’s business might be going strong, the franchisee needs to be comfortable with the financial strength of the franchisor.

Franchise Territory - Know your Boundaries

This is a guest post from Peter McLaughlin, a franchise lawyer and member of The Franchise Accountants Network.  The nature of territory rights is always a hot topic for prospective franchisees. Many people want an exclusive or protected area to operate their business in return for paying the upfront franchise fee. So the question often asked is - what rights do I have to a territory under my franchise agreement?

Is the territory exclusive or non-exclusive?

You may be granted exclusive rights for a territory or only the right to operate at a specified location (like a shop in a shopping centre). If your rights are exclusive for a territory there will generally be conditions attached – usually in the nature of minimum performance requirements. If the territory rights are to be exclusive the agreement should prevent both the franchisor and other franchisees prevented from operating in your territory.

Some franchise systems have no territory protection, meaning other franchisees can open close by.

Other terminology is sometimes used in franchise agreements such as marketing area or first right of refusal area. These terms can all have different meanings and implications for the franchisee. Even "exclusive territories" are not always exclusive, depending on how the franchise agreement has been drafted.

Seek advice if you're not sure

It is important to understand the nature of any territory rights that are given to you and any conditions or restrictions that apply. This involves understanding not only the franchise agreement but the commercial considerations about how the business operates, and what type of territory rights are appropriate.

How we can help

We regularly work with franchisees before they enter into franchise agreements, and also during the course of the agreement where disputes or uncertainty arise regarding their rights under the franchise agreement. Contact Peter McLaughlin at redchip lawyers on 07 3223 6100 or email PeterM@redchip.com.au  to discuss how we can help you.