The ACCC has accepted a court-enforceable undertaking by Back In Motion Physiotherapy Pty Ltd to remove certain terms from its franchisees agreements which it admits may be unfair.
Under a restraint of trade clause contained in most of the Back In Motion Physiotherapy franchise agreements, any franchisee who wanted to leave the group was not allowed to be involved in any competing practice located within a radius of up to 10 kilometres of a Back In Motion Physiotherapy franchise for up to 12 months.
“Effectively, this clause in the franchise agreement meant that most former franchisees could not operate in many parts of metropolitan areas of Australia because of the existence of other Back In Motion Physiotherapy franchise outlets in those locations,” ACCC Deputy Chair Mick Keogh said.
“We were concerned that this clause may cause detriment to franchisees seeking to exit the Back In Motion Physiotherapy franchise.”
The franchise agreements also included a clause under which Back In Motion Physiotherapy could charge franchisees a ‘buy out fee’ equal to four times their annual royalty fees, if they opted to be released from the unfair restraint of trade.
Back In Motion Physiotherapy has admitted that the restraint of trade and buy-out fee terms, which have been part of most of their standard franchise agreement for more than 15 years, may be ‘unfair’ as defined by the Australian Consumer Law.
After being contacted by the ACCC, Back In Motion Physiotherapy has undertaken not to enforce the restraint of trade and buy-out fee terms in future, or for franchisees who have left the group in the past 12 months. It will also not include these terms in its future franchise agreements.
Back In Motion Physiotherapy has also undertaken to inform all affected franchisees including those who left within the past 12 months that these terms will not be enforced.
“Franchisees can now leave the Back in Motion Physiotherapy franchise group and find work or set up business anywhere in Australia, including in the same area without having to pay an exorbitant fee,” Mr Keogh said.
“Franchisors often have a stronger bargaining position in their dealings with franchisees, and we will investigate and take action against franchisors where we believe their contracts with small businesses contain unfair contract terms under the Australian Consumer Law.”
A clause restricting former franchisees for nine months from actively soliciting a client they know has been a client of a Back In Motion Physiotherapy franchise located within 10km of the former franchisee’s Back in Motion Physiotherapy practice continues to apply.
Note
Under the Australian Consumer Law and the Franchising Code of Conduct, there is no prohibition on businesses including or relying on unfair contract terms against franchisees. Although courts can declare terms to be unfair, with the result that they are void and unenforceable, penalties cannot be imposed on companies using these unfair terms.
The ACCC is responsible for regulating mandatory industry codes that are prescribed under the Competition and Consumer Act, including the Franchising Code of Conduct. The Franchising Code is a mandatory national code that regulates the conduct of franchising participants towards each other.
The activities of the ACCC in franchise matters include:
- the provision of comprehensive franchise education and guidance materials,
- an active Franchise Code compliance program, and
- enforcement activities, including the issuing of infringement notices and commencing court action in appropriate cases where corporations breach the law.
Further information about franchising is available on our website at www.accc.gov.au/smallbusiness.
Background
Back In Motion Physiotherapy is a franchisor with a network of over 500 franchisees who provide physiotherapy and related services in Australia and New Zealand. They are one of the largest businesses in the market for physiotherapy and related services.
Back In Motion Physiotherapy has used a standard form franchise agreement for the supply of franchised physiotherapy practices since at least 2004.
