The Franchising Australia 2008 survey found the average age of Franchised Businesses was 15 years, 9 years of which were operated as Franchises. The most common term reported in the survey for Franchise Agreements was 5 years, with 10 years coming in second.  Only 6% of Franchisors surveyed offered terms of 3 years or less (264 Franchisors were surveyed).

The length of the initial term usually varies by industry practice, the initial investment required and the nature of the franchise business. 

The Franchising Code does not give Franchisees an automatic right to renewal a Franchise Agreement.  The standard Franchise Agreement consists of a right of renewal subject to the Franchise’s sales performance and compliance with the Franchise Agreement.

Over half the Franchisors reported that 98 per cent of their franchisees had renewed their agreements upon expiration of the initial term. Only 5 per cent of Franchisors indicated that none of their eligible Franchisees had renewed. Overall, Franchise Agreement renewal was standard practice in the sector.

However, if deciding not to renew a Franchisee upon expiry of the Franchise Agreement, the Franchisor must keep in mind not to engage in unconscionable conduct in which the following factors will be considered:

• Bargaining Strength of parties
• Whether the smaller party was required to comply with conditions which were not reasonably necessary to protect the business interests of the larger party
•  Any influence, pressure or unfair tactics used by the larger business 
• Whether all the Franchisees were treated in a consistent, uniform way 
• The extent to which the Franchisor was willing to negotiate terms & conditions
• The extent to which the parties acted in good faith
• Whether the Franchisee had a reasonable opportunity to seek legal advice

Read the full article here.