Chasing a Franchisee Evading Post- termination Obligations through Corporate Entities under External Administration

摘要

In order to protect a franchise system, the franchise agreement will generally prohibit a former franchisee continuing in a competing business in the franchise territory for a particular period. This ensures the franchisor is free to license a new franchisee without the risk of the former franchisee lingering in the territory. But what can a franchisor do when a franchisee unilaterally ceases to operate the franchise, transfers its assets and business to a new corporate entity and this entity then opens for business at the same site, with a new trade name, a new logo and a new coat of paint for the premises? This article explores the actions of the JAX tyre franchisor responding to a former franchisee doing just that. When the franchisor reacted by enforcing a charge over the franchisee's assets granted as part of the franchise agreement, it could not have anticipated it would subsequently be faced with having to negotiate with four different corporate external administrations in order to protect its interests. The dispute left the former franchisee in liquidation, the main individual concerned in bankruptcy and the franchisor far from satisfied with the legal remedies it was able to obtain.