Kwik Kopy case raises question of franchise

By IRENE CHAPPLE

A bitter legal fight has effectively ended Kwik Kopy's New Zealand franchise operation.

The dispute has also raised the question - is a franchise without local critical mass still a franchise operation in that country?

The breach of contract case was brought by Kwik Kopy Australasia against former New Zealand franchisees.

The case involved Kwik Kopy's claims that the franchise holders had breached restraint of trade provisions in their franchise agreements.

They had traded from the same sites as the Kwik Kopy franchises, but under a different name, after their contracts were terminated. One had also refused to pay outstanding franchise fees when its contract was terminated.

The dispute was settled out of court last week after a fortnight of legal wrangling.

The case was "resolved to the full satisfaction of the franchisor ", said Kwik Kopy, with "all claims brought against Kwik Kopy withdrawn".

However, franchisee Peter Clarke, who had been sued for breach of contract along with his sons Keith and Gavin, said he had not continued with the case as it was too expensive.

Clarke had alleged there was little goodwill in the Kwik Kopy name because the franchise had opened only six stores in nine years.

Clarke had also alleged that the Kwik Kopy franchise had promised it would open 25 centres after the first one opened in 1993.

Only one had opened in the last eight years, said Clarke, before five of the six existing outlets resigned from the franchise early this year.

These claims were withdrawn as part of last week's settlement, with Kwik Kopy saying it never promised there would be 25 stores.

A statement released in 1993 spoke of the "potential" for 25 stores.

Under the settlement, the franchisees have to relocate, are prohibited from soliciting former customers and have to return all marketing material.

Managing director of Kwik Kopy Australia Matthew Penfold said it was "yet another case in New Zealand that has favoured the franchisor ".

He said it was a "great shame the franchisees took this course of action".

Penfold said Kwik Kopy would now focus on expanding its business in New Zealand, and would put together a new strategy in the first quarter of next year.

Penfold said the sole surviving operator in New Zealand had good brand recognition and would be part of those plans.

Clarke said Kwik Kopy was the loser, as it now had only one New Zealand outlet and could no longer call its operations here a franchise.

Franchise Association vice-president Simon Lord said Kwik Kopy was still a franchise, as it had global operations.

However, he said if there was only one outlet it was in reality more of a "franchise opportunity".

He said there was no definition in law of a franchise. "I don't think you can define it as the number of outlets - maybe two or three would be sufficient to create a name in the country. But for something bigger, you'd want more outlets."

Obligations between franchisee and franchisor created a franchise, said Lord.

"Obligations could range on the franchisee side of operating under the name and in accordance with the franchise system ... while obligations upon the franchisors could be to research and develop the system and provide support."