Not Every “Licence” Is a Franchise…
And That Matters
Case Review: Freedom Foods Pty Ltd v Blue Diamond Growers [2021] FCAFC 86
An Australian company entered into a licence agreement with a US brand to manufacture and sell almond milk products under its name and trade marks.
The Problem
On its face, it looked like a standard licensing and supply arrangement.
But when things went south, the Australian company argued it was actually a franchise agreement — which would bring it under the Franchising Code and block offshore arbitration.
The Outcome
The Court said it was not a franchise.
Even though there were branding requirements, product specifications, and some oversight, the key element was missing — the franchisor did not control or determine the system or marketing plan for how the business was run.
As a result, the Franchising Code didn’t apply, and the overseas arbitration clause stood.
The Lesson for Franchisors
Not every branded relationship is a franchise.
If you’re not actually controlling how the business operates — the system, the marketing, the way it runs day to day —
you may fall outside the Code altogether.
That can cut both ways.
For franchisors, it might mean fewer regulatory obligations.
But for operators relying on the Code for protection, it can disappear pretty quickly if the structure isn’t a true franchise.
Judgement:
http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCAFC/2021/86.html
If you’re unsure whether licencing or franchising is the right model for you then let’s chat and we’ll walk you through it.