BREACHES AND TERMINATION

Every franchise system needs a clear process for dealing with franchisees who do not meet their obligations.

Kiwikrane is no different.

Our preference is always to work with franchisees to resolve issues quickly and maintain a successful relationship. However, there are circumstances where a breach is sufficiently serious that termination of the franchise may be appropriate.

The franchise agreement sets out the formal rights and obligations of both the franchisee and the franchisor, including the circumstances and procedures relating to breach and termination.

You should read your franchise agreement carefully so that you understand these provisions. This section is intended to provide practical guidance on the types of behaviour that Kiwikrane considers serious, but it does not replace or override the terms of your franchise agreement.

BREACH NOTICES

Some breaches are less serious and may be capable of being quickly corrected.

Where this occurs, we will normally discuss the issue with you and may communicate the required corrective action by email. Depending on the circumstances, a formal breach notice may also be issued.

If you receive a breach notice, you need to take it seriously and rectify the issue within the timeframe specified.

A breach notice is an opportunity to put something right. Failure to rectify the issue, or continuing to repeat the same behaviour, can escalate the matter and may ultimately result in termination in accordance with the franchise agreement.

You should also be aware that multiple breaches can demonstrate an ongoing failure to meet your franchise obligations. In particular, three breach notices during the term of a franchise may result in termination, whether or not the individual breaches have subsequently been rectified, subject always to the terms of your franchise agreement.

EXAMPLES OF MATTERS LIKELY TO RESULT IN A BREACH NOTICE

The following are examples of matters that may result in a breach notice where they are not otherwise considered sufficiently serious to warrant more immediate action:

• Failing to pay amounts owing to the franchisor when due.
• Failing to pay venue commissions in accordance with the agreed terms.
• Failing to visit machines at the required service intervals.
• Failing to use the required Kiwikrane software or complete required reporting in a timely manner.
• Machines operating with consistently very low payouts.
• Poorly presented or poorly maintained machines.
• Failing to respond to site or customer complaints in a timely and appropriate manner.
• Failing to maintain the required $10,000,000 public liability insurance.
• Failing to ensure machines remain electrically compliant.
• Failing to keep software locations and transactions accurate and up to date.
• Accidentally operating a machine in another franchise territory, such as an unintended boundary incursion.
• Entering into a sale or other transaction involving Kiwikrane machines or the franchise business without notifying the franchisor where notification is required.

These examples are not exhaustive. Other failures to meet the requirements of the franchise agreement, Kiwikrane National Standards or reasonable directions from the franchisor may also constitute a breach.

MATTERS THAT MAY RESULT IN IMMEDIATE TERMINATION

Some conduct is fundamentally inconsistent with the trust required between a franchisor and franchisee.

Examples include:

• Dishonesty or fraudulent conduct in any form.
• Purchasing stock from suppliers other than Kiwikrane without an approved exemption.
• Knowingly or deliberately failing to accurately declare machine income.
• Knowingly operating machines in another franchisee’s territory without approval.

These matters are particularly serious because they can directly undermine the trust, commercial model and integrity of the Kiwikrane System.

Where conduct constitutes grounds for immediate termination under the franchise agreement, Kiwikrane may exercise its rights accordingly.

TERRITORY INCURSIONS

Not every territory issue is deliberate.

For example, a franchisee may unintentionally place or operate a machine close to a territorial boundary without realising that it falls within another franchisee’s territory. We understand that genuine mistakes can happen.

If you discover that you have inadvertently operated in another territory, notify Kiwikrane immediately and take steps to correct the situation.

Knowingly operating in another franchisee’s territory is fundamentally different. Deliberately taking business or placing machines in another franchisee’s territory without approval undermines the franchise system and may constitute grounds for immediate termination.

THE SIMPLE RULE

If you make a mistake, tell us.

If we raise an issue with you, fix it.

If you receive a breach notice, treat it seriously.

If you are unsure whether something is permitted under your franchise agreement, ask us before you act.

Our objective is not to catch franchisees out. Our objective is to maintain a strong, fair and successful franchise network where every franchisee can operate knowing that the same rules apply to everyone.

However, the Kiwikrane brand and the investment made by all franchisees must be protected. Where a franchisee seriously breaches their obligations, Kiwikrane must be prepared to take the action available to it under the franchise agreement.