National business name registration process to commence
A new national online registry of business names is expected to commence this year.
ASIC will take responsibility of this new service, which is part of a governmental initiative to save time and cut costs for people starting new businesses.
Currently, business owners are required to register the name of their business (if they are not trading under their own name) in each State or Territory in which the business operates. Under the new system business owners will only have to register their business name once, regardless of whether or not that business trades in multiple jurisdictions. This will result in substantial savings for many businesses.
Business owners will be able to apply online and in most cases should receive confirmation of registration immediately. Businesses will also be able to make a joint application for a business name and an ABN.
Another benefit of the new national system is that the register will carry out automatic checks for identical or similar company names, so business owners will no longer need to perform these searches.
New registrations will require an ABN in order to register a new business name. Existing registrations will not require an ABN provided that the business name is currently registered on a state register and does not have an ABN.
Existing registered business names will be automatically transferred to the national register.
It is important to keep in mind that:
- registering a business name does not itself give any proprietary rights in the name;
- only a registered trade mark provides this kind of protection; and
- the onus is on the applicant to ensure that the business name does not infringe on anyone else's intellectual property rights.
We will keep you updated when the amended draft legislation is available.
End of Term Arrangements - enforcing a restraint of trade provision
In the recent case of BB Australia Pty Ltd v Karioi Pty Ltd [2010] NSWCA 347, the court considered the rights of the franchisor, Blockbuster, after the end of a franchise agreement and in particular:
- whether the agreement had been terminated or had expired; and
- the enforceability of the restraint of trade clauses.
Background
In April 1998 Blockbuster and Karioi entered into 2 franchise agreements to convert Karioi's existing video store businesses into Blockbuster stores. The initial term ended in April 2008. With Blockbuster's approval, Karioi continued to operate the stores as Blockbuster stores at both locations after the expiration of the initial term while the parties negotiated a renewal of the agreements. The negotiations were unsuccessful and both parties purported to terminate the agreements. Blockbuster then commenced proceedings seeking orders, to enforce the restraint of trade provisions in the franchise agreement and that Karioi was required to sell certain assets of Karioi's businesses to Blockbuster.
Termination or expiry?
Blockbuster had certain rights upon termination of the franchise agreements (which did not apply upon expiration). In particular, Blockbuster's right to require Karioi to sell assets of its businesses to Blockbuster only arose upon termination. The court looked at the correspondence between the parties and concluded that the communications showed an understanding that Karioi would continue to operate as a Blockbuster franchisee until it either renewed the franchise agreements, or the negotiations concluded without agreement. The court noted that there was a mutual assumption that if the parties were unable to reach agreement upon the terms of the renewal Blockbuster's consent to Karioi's operation of the franchises would be withdrawn. Relevant factors considered by the court were:
- correspondence from Blockbuster that suggested Blockbuster would consider exercising rights that only arose upon expiry of the agreements; and
- with the exception of the making of an agreement in writing "to cancel" the agreements, all of the circumstances justifying termination required a default by Karioi (and no such default was alleged).
Restraint of trade
The court considered whether it was necessary to enforce the restraint of trade provision in the franchise agreement which would prevent Karioi from operating a similar business and found that it was not necessary as:
the goodwill in Blockbuster's brands and systems was sufficiently protected by other clauses in the franchise agreements which prohibited the franchisee from using Blockbuster's intellectual property and confidential information after the end of the agreements;
Blockbuster did not have any goodwill in the specific location of the premises as Karioi already operated its business from the premises prior to becoming a Blockbuster franchisee and Blockbuster had not acquired any interest in the the premises upon granting the franchise to Karioi; and
there was no evidence that the Karioi would have an unfair advantage over a new franchisee because there was no reason, apart from the location of the stores, that customers would frequent a non-Blockbuster store conducted by Karioi rather than a Blockbuster store in a similar area.
Key learnings for a Franchisor from this case
- Understand the implications of the expiry of franchise agreement compared with termination under your franchise agreement.
- Ensure communications with franchisees are clear and consistent particularly regarding expiry or termination.
- Courts may not uphold a restraint of trade where there are other ways of protecting goodwill, such as clauses preventing a party from using the other party's confidential information and intellectual property.
- Ensure that if a franchisor considers that it has good will in particular location where the franchised business, (particularly where the franchisee holds the lease) documents are in place to protect the franchisor's goodwill such as a step-in deed.
Franchise Enterprise Agreement Approved
Hall & Wilcox recently assisted a national fast food franchisor in the preparation and roll-out of an enterprise agreement to cover its company-owned stores.
The agreement was drafted to accommodate the business' unique rostering arrangements and its young staff who work a broad span of hours. It featured a combination of loaded "all-in" rates and penalty and overtime provisions which differed to those under the modern award.
In addition to drafting the agreement, Hall & Wilcox advised and assisted the franchisor with preparation of necessary communications to staff, provided ongoing advice during the negotiation process and assisted the franchisor in its application to Fair Work Australia for approval of the agreement.
The agreement was found to pass the Better Off Overall Test and was negotiated directly with the employees without union involvement. The agreement was approved by Fair Work Australia "on the papers" without the need for a hearing.
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