Franchising 2026 Comparisons

Franchising is a very common business model in New Zealand.

The Franchising New Zealand 2024 survey conducted by Dr Simon Moore and Prof Jonathan Elms at Massey University identified that in 2024 the franchise sector turnover was approximately NZD73.4 billion including business format franchises, motor vehicle sales and retail of fuel.

International franchise brands operating in the New Zealand market include McDonald’s, Domino’s, Pizza Hut and Starbucks. New Zealand-founded franchise brands include Green Acres (lawn and garden care), Rodney Wayne (hair salons), Stirling Sports (athletic retail) and Robert Harris (cafes).

New Zealand does not have legislation specific to franchising that regulates the ongoing relationship between franchisors and franchisees. Instead, franchise arrangements are subject to a range of general laws, including those governing contracts, unfair contract terms, competition, intellectual property (IP), employment, consumer law, privacy and real estate, as well as a voluntary franchise code.

A key piece of legislation is the Fair Trading Act 1986, which imposes obligations on all traders. It prohibits unconscionable conduct, misleading or deceptive practices, and making claims that cannot be substantiated.

While membership in the Franchise Association of New Zealand (FANZ) is voluntary, those who join must then operate in accordance with its Code of Practice and Ethics (the “FANZ Code”) and its Best Practice in Franchising Constitution. The FANZ Code promotes ethical conduct and best practice standards in franchising, including requirements for transparency, dispute resolution and fair dealing.

In New Zealand, there is no statutory definition of “franchising”. However, FANZ provides a definition in its Constitution.

A “franchise” is defined as the method of conducting business under which the right to engage in the offering, selling or distributing of goods or services within New Zealand includes or is subject to at least the following features:

• the grant by a franchisor to a franchisee of the right to the use of a mark, in such a manner that the business carried on by the franchisee is or is capable of being identified by the public as being substantially associated with a mark identifying, commonly connected with or controlled by the franchisor;
• the requirement that the franchisee conducts the business, or that part of the business subject to the franchise agreement, in accordance with the marketing, business or technical plan or system specified by the franchisor; and
• the provision by the franchisor of ongoing marketing, business or technical assistance during the term of the franchise agreement.

While FANZ membership is voluntary, and the above definition is not legally binding, it is a useful reference when interpreting what constitutes “franchising” in New Zealand.

New Zealand law does not specifically cover disclosure requirements in a franchise context. Laws relevant to a particular industry provided by the franchise should be assessed for any requirements of this nature.

Disclosure documents are best practice to ensure that prospective franchisees are informed about the franchise and their investment, and to mitigate risks of misrepresentation.

Franchisors should ensure that all disclosure materials are thorough, accurate and transparent, and comply with New Zealand’s general laws on commercial contracting and dealings, including the Fair Trading Act 1986. This Act prohibits unconscionable conduct in trade, misleading or deceptive conduct (which may include omissions), and unsubstantiated representations. Of relevance to the franchise sector is Section 22 of the Fair Trading Act 1986, stipulating the following.

• No person shall make a representation that is false or misleading in a material particular concerning the profitability or risk or any other material aspect of any business activity that that person represents as one that can be, or can be to a substantial extent, carried on at or from a person’s place of residence.
• No person who invites, whether by advertisement or otherwise, persons to engage or participate, or to offer or apply to engage or participate, in a business activity requiring the performance by the persons concerned of work, or the investment of money by the persons concerned and the performance by them of work associated with the investment, shall make, with respect to the profitability or risk or any other material aspect of the business activity, a representation that is false or misleading in a material particular.

Franchisors must ensure that all material information disclosed is accurate.

If the franchisor is a member of FANZ, mandatory disclosure obligations apply under the FANZ Code. Disclosure must follow the FANZ Code, which contains a list of required disclosure document contents, including the following.

• Franchisor details.
• A resume of the business experience of the franchisor and key directors/executives/managers.
• A current franchisor solvency certificate (the contents of which are prescribed in the FANZ Code).
• Details of any bankruptcies, receiverships, liquidations, etc, of the franchisor or its directors/executive officers/principals from the past five years.
• A summary of the main particulars and features of the franchise, including:
1. the nature and period of existence of the franchise system and how it has developed;
2. examples of any relevant registered trade marks, logo, symbol or other relevant forms of IP used to market or promote any form of IP of the franchisor’s goods or services, and steps taken to protect these – if IP is licensed to the member, there must be a brief explanation of the member’s right to use the IP and ownership by related/associated companies, and details of any threatened or pending litigation in relation to these;
3. details of initial and ongoing payments to be made by the franchisee to the franchisor (including the method of calculation if applicable, and the amount to be refunded by the franchisor if the franchisee terminates the franchise agreement within the cooling-off period);
4. particulars of any restrictions imposed on the franchisee (eg, territorial, or the offer of competing franchises);
5. a summary of the terms and conditions for the purchase of services, goods, fixtures, property, etc, from the franchisor and the situation applying if the source of goods/products supplied by the franchisor fails, plus relevant comments/conditions with respect to rebates, etc, from suppliers (at a minimum disclosing whether the franchisor is entitled to receive rebates or financial benefit from suppliers, and whether any rebate or financial benefit is shared, directly or indirectly, with franchisees);
6. the basis of the franchisor’s involvement/approval in the selection of the site of any franchisee business premises (where applicable);
7. a summary of the terms and conditions relating to termination, renewal, goodwill, and assignment of the franchise; and
8. a summary of the main obligations of the franchisor (including initial and ongoing training to be provided).
• A list of components making up the franchise purchase.
• Details of financial requirements of franchisees.
• Information about current franchisees, recent terminations or non-renewal of franchisees, and litigation with existing or former franchisees.
• Financial projections (or a statement that financial projections are not provided).
• A statement as to whether the territory or site to be franchised has been subject to any trading activity, particularly a previous franchise in the same franchise system within the previous five years, and if so, the history and details including the circumstance of any cessation of the franchise.
• A statement indicating that the prospective franchisee should seek independent legal and accountancy advice and, if the prospective franchisee declines to obtain that independent advice, that it will need to sign a statement to that effect.

Under the FANZ Code, the disclosure document must be updated at least annually.

The disclosure document must be provided to prospective franchisees at least 14 days before signing a franchise agreement, or before becoming bound by a preliminary agreement. Existing franchisees are entitled to receive an updated disclosure document within one month of requesting it when renewing their franchise agreement.

If the franchisor or franchisee is a publicly listed entity in New Zealand, additional disclosure obligations may apply due to continuous disclosure requirements imposed by the stock exchange.

If a franchisor fails to provide disclosure, and this failure leads to a misinformed decision, the franchisee may be able to terminate the agreement and/or claim damages against the franchisor.

As New Zealand does not have specific franchise laws, a franchisee claim would be pursuant to New Zealand’s general commercial laws, including under the Contract and Commercial Law Act 2017 and the Fair Trading Act 1986. In addition, laws and regulations relevant to the particular industry of the franchise should be assessed for any requirements of this nature.

Under the Contract and Commercial Law Act 2017, a franchisee may be entitled to damages from the franchisor or be able to cancel a contract with a franchisor if the franchisor makes a misrepresentation. For example, a franchisee may be able to cancel a franchise agreement if:

• the truth of the representation is essential;
• the effect of the misrepresentation will substantially reduce the benefit, or substantially increase the burden, of the contract; or
• it will make the benefit or burden of the contract substantially different from that represented or contracted for.

Franchisees may also pursue claims under the Fair Trading Act 1986 if the franchisor engages in misleading, deceptive or unfair practices. In addition to remedies such as injunctions and awards of damages, companies can be liable for fines of up to NZD600,000 and individuals for up to NZD200,000.

It is possible to contract out of some statutory remedies through disclaimers or exclusion clauses. The enforceability of such clauses depends on whether they were clearly communicated before or at the time of contracting. Courts interpret exclusion clauses strictly, and any ambiguity is typically resolved against the party relying on the clause. Notably, clauses attempting to exclude liability for fraudulent misrepresentation are always unenforceable.

In addition, for FANZ members, FANZ has a complaints procedure for breaches of the FANZ Code. Sanctions which may be issued include:

• written censure of the member (confidential);
• suspension or removal from FANZ membership;
• a direction to undertake remedial action in respect of the conduct;
• a written apology to the complainant; and
• the recovery of reasonable costs incurred by FANZ.

In New Zealand, there are no statutory franchise disclosure obligations under general law. If a franchisor is a member of FANZ, they are required to comply with the FANZ Code, which includes mandatory disclosure requirements.

The official languages of New Zealand are English, Te reo Māori and New Zealand Sign Language. Typically, contracts are in English.

There are no franchise registration requirements under New Zealand law. Franchisors are not required to register their franchise agreement, disclosure document or themselves with any government authority before operating in New Zealand.

There is no franchise registration process in New Zealand.

This topic is not applicable.

There are no past-profitability requirements under New Zealand law.

If a franchisor is a member of FANZ, the franchisor is required to comply with the FANZ Code, which includes a requirement to provide potential franchisees with a Franchisor Solvency Certificate and ongoing disclosure requirements.

Similarly, the Fair Trading Act 1986 prohibits misrepresentations in the course of trade, and representations need to be true and substantiated.

In New Zealand, there are no legal or regulatory requirements that prescribe a minimum or maximum duration for franchise agreements. The duration is agreed between the franchisor and franchisee. Note that New Zealand contract and commercial law requirements include a prohibition on unfair contract terms – see 8.4 Prohibited Provisions in Local Law.

In New Zealand, there are no legal or regulatory requirements that prescribe renewal rights. As mentioned previously, note the New Zealand contract and commercial law requirements including a prohibition on unfair contract terms – see 8.4 Prohibited Provisions in Local Law.

There are no legal requirements around termination or minimum notice periods specific to franchises under New Zealand law. As mentioned previously, note the New Zealand contract and commercial law requirements including a prohibition on unfair contract terms – see 8.4 Prohibited Provisions in Local Law. In addition, laws and regulations relevant to the particular industry of the franchise should be assessed for any requirements of this nature. 

The Commerce Act 1986 (New Zealand) prohibits the following.

• The entering into or giving effect to cartel provisions between competitors (Section 30). A cartel provision is a provision contained in a contract, arrangement or understanding between competitors (including potential competitors) for the supply or acquisition of goods or services which has the purpose, effect or likely effect of fixing prices, restricting output or allocating markets. Breach of the cartel prohibition is a criminal offence in New Zealand.
• The entering into or giving effect to a provision of a contract, arrangement or understanding (Section 27), or a person with substantial market power from engaging in conduct (Section 36), which has a purpose, effect or likely effect of substantially lessening competition in a relevant market. 

The Commerce Act was amended from 5 April 2023 to remove historic protections for IP licensing agreements and the enforcement of statutory IP rights.

Previously, Section 36(3) provided that a business does not take advantage of market power simply by enforcing a statutory IP right (eg, a patent, trade mark or copyright). Section 45(1) also previously added that the Act’s other prohibitions do not apply to the entering into of IP agreements (such as licences, settlement and coexistence agreements) in so far as they contained a provision that authorises something that would otherwise be prohibited by an IP right, or giving effect to such provisions. This could extend to restraints on operating areas, first and third line forcing and other structural arrangements.

These protections have now been removed, bringing New Zealand more in line with Australia (the Australian regime retains more flexibility as it has a permissive exception for “exclusive dealings”). There is still considerable uncertainty about the extent to which the removal of the IP exception will impact the exercise of IP rights in New Zealand. The Commerce (Promoting Competition and Other Matters) Amendment Bill was introduced in December 2025 and, at the time of writing, is proceeding through its final parliamentary readings. If passed, the proposed amendments to the Commerce Act will empower the Commission to grant “class-exemptions” for categories of low-risk conduct, introduce an additional streamlined collaborative activity clearance process, and establish a statutory notification regime allowing businesses to proceed with certain types of conduct unless the Commission objects. These changes are expected to impact franchise models given the inherent issues following the 2023 removal of the IP safe harbour exception.

As can often be the model in franchise structures, if the franchisor is itself operating in the market and also selling goods or providing services in competition with its franchisees, they may be competitors for the purposes of the Commerce Act. Often, franchise agreements contain restrictions which could therefore be viewed as potential cartel provisions (ie territorial, field-of-use or customer restraints). These provisions may breach the Commerce Act’s cartel prohibition or prohibition on anti-competitive arrangements unless one of the exceptions applies.

Businesses with substantial market power which enforce statutory IP rights in a way that has the purpose and/or effect of substantially lessening competition in a market are now subject to the Section 36 misuse of market power prohibition. An owner of IP rights might have a substantial degree of power in a market simply by virtue of its ownership of those rights, especially if there are no acceptable substitutes for the products/services the owner supplies in that market (for example, where the party is the first to patent a particular technology).

The Commission considers this situation in its Guidelines on the Application of Competition Law to Intellectual Property Rights, and notes that a refusal to license to a competitor or even a potential competitor may be a misuse of market power in some circumstances.

New Zealand law also prohibits suppliers from specifying a minimum resale price or taking actions to enforce a specified resale price (including inducing or attempting to induce another person not to sell at a price less than that specified).

The permissibility of including and enforcing exclusive territories in franchise agreements depends on the specific circumstances and the extent of restrictions imposed.

Exclusive territories in franchise agreements may trigger three prohibitions under the Commerce Act 1986:

• the cartel prohibition;
• the general prohibition on anti-competitive provisions; and/or 
• the misuse of market power prohibition.

Cartel Prohibition

If a franchisor and franchisee are competitors for the supply of goods or services, an exclusive territory clause may amount to market allocation, which is a form of cartel conduct. This is prohibited unless an exception applies.

The most relevant exception to the cartel prohibition for exclusive territories is the collaborative activity exception. The collaborative activity exception applies where:

• the franchisor and franchisee are engaged in a collaborative activity;
• the dominant purpose of the collaborative activity is not to lessen competition between the parties; and
• the exclusive territory clause is reasonably necessary for the purpose of the collaborative activity.

Franchise agreements may qualify as collaborative activities. However, franchisors must ensure that the clause is reasonably necessary for the purpose of the collaborative activity. This involves a fact-specific assessment of the exclusive territories’ scope and duration, and whether less restrictive alternatives could achieve the same outcome.

If exclusive territories extend beyond the term of the agreement (eg, one year), the cartel prohibition does not apply if three conditions are met:

• the collaborative activity has ended;
• the exclusive territories were reasonably necessary to achieve the aims of that collaborative activity; and
• the agreement did not end because its dominant purpose became the lessening of competition between the franchisor and franchisee.

The proposed amendments to the Commerce Act establish an additional streamlined collaborative activity clearance process. Under this new process, the Commission will be able to grant a clearance if the collaboration meets the requirements of the collaborative activity exception, without needing to assess its competitive effects. Applications under this new pathway are subject to a 30-working-day statutory timeframe, with a deemed decline if no decision is made within that period. This change is expected to simplify and speed up the clearance process.

The other relevant exception is the vertical supply contract exception. For the vertical supply contract exception to apply to exclusive territories:

• the contract must be between a supplier or likely supplier of goods or services and a customer or likely customer of that supplier;
• the cartel provision must relate to the supply or likely supply of the goods or services to the customer or likely customers; and
• the cartel provision must not have the dominant purpose of lessening competition between any two or more of the parties to the contract.

For the vertical supply contract exception to apply to exclusive territories, the franchise agreement must involve the franchisor supplying goods or services to the franchisee. The exclusive territory clause must relate to that supply and must not have the dominant purpose of reducing competition between the franchisor and franchisee.

General Prohibition on Anti-Competitive Provisions

The exclusive territories must also be assessed under the general prohibition on provisions in contracts, arrangements, understandings or covenants that have the purpose, effect or likely effect of substantially lessening competition in a relevant market. The relevant market is based on a market definition that best isolates the key competition concerns.

Misuse of Market Power Prohibition

Enforcing exclusive territories may also trigger the misuse of market power prohibition. This applies where the franchisor holds substantial market power and the enforcement of the clause has the purpose, effect or likely effect of substantially lessening competition in a defined market.

Restraint of Trade Common Law Doctrine

Exclusive territories also constitute a “restraint of trade”. Under New Zealand common law, a restraint of trade is unenforceable unless the party seeking enforcement establishes that it is reasonably necessary to protect a legitimate commercial interest (eg, goodwill). Typically, franchise agreements will include a restraint of trade on that basis.

The franchisor may require a franchisee to purchase certain products or services from the franchisor or its nominated suppliers, provided this does not contravene Sections 27, 30 or 36 of the Commerce Act.

A provision in a franchise agreement that requires franchisees to purchase certain goods or services from a third-party supplier may be considered a market allocation provision (a type of cartel provision) if the franchisor and franchisee are competing to acquire those goods or services.

There is an exception under the Commerce Act for joint buying and promotion agreements. The joint buying and promotion agreements exception applies where a provision in a contract, arrangement or understanding:

• relates to the price for goods or services to be collectively acquired by some of the parties to the arrangement;
• provides for joint advertising of the price for the resupply of goods or services acquired collectively;
• provides for a collective negotiation of the price of goods or services which are then purchased individually; or
• provides for the purchase of goods or services to occur via an intermediary.

The joint buying and promotion agreements exception only excludes the application of price fixing, not other cartel provisions such as market allocation provisions.

The provision which requires the franchisees to purchase specific goods or services from certain parties must also not have the purpose, effect or likely effect of substantially lessening competition in the relevant market, as prohibited under Section 27 of the Commerce Act.

Where the franchisor holds substantial market power, such a requirement on franchisees may also breach the misuse of market power prohibition if it has the purpose, effect or likely effect of substantially lessening competition in a defined market.

Franchisors can reserve certain channels, as long as:

• the reservation is not a cartel provision or is a cartel provision, but an exception applies;
• the reservation does not have the purpose, effect or likely effect of substantially lessening competition, in breach of the general prohibition against anti-competitive provisions; and
• if the franchisor has substantial market power, the reservation does not have the purpose, effect or likely effect of substantially lessening competition in that market.

Channel reservations in franchise agreements, such as allocating online platforms or other sales channels, may be considered market allocation or output restriction provisions (which are cartel provisions) where the franchisor and franchisee compete for the supply of goods or services. As with exclusive territories, cartel provisions are prohibited unless an exception applies. The most relevant exception is the collaborative activity exception, but the vertical supply contract exception may also apply in some circumstances.

The Commerce Commission can authorise certain provisions in contracts, arrangements, understandings or conduct that may breach competition laws, if the public benefits outweigh the anti-competitive detriments. This authorisation can apply to:

• anti-competitive provisions (Sections 27 and 28);
• cartel provisions (Section 30);
• misuse of market power (Section 36); and
• resale price maintenance (Sections 37 and 38).

Once authorised, the provision or conduct subject to the authorisation is protected from legal action under the Commerce Act, both by the Commission and private individuals.

The Commission may grant clearance for cartel provisions under the collaborative activity exception. Clearance will be given if the applicant can demonstrate that all criteria for the collaborative activity exception are met. This clearance regime is voluntary and there is no statutory requirement to seek clearance for the collaborative activity exception to apply.

If the proposed changes to the Commerce Act are implemented, the Commission would be empowered to grant class exemptions for defined categories of conduct to proactively exempt classes of persons or transactions from compliance with the Commerce Act prohibitions, including both the anti-competitive conduct and anti-competitive acquisition prohibitions. Exemptions would be time-limited and subject to conditions. The Commission could grant a class exemption where it is satisfied that the relevant conduct is unlikely to substantially lessen competition, or that the public benefits outweigh the detriments. The practical impact of this change will depend on how actively the Commission chooses to exercise its powers.

A separate statutory notification regime would also be introduced, allowing businesses to proceed with certain types of conduct that are likely to be in the public interest or are unlikely to substantially lessen competition after notifying the Commission, unless the Commission objects within a set timeframe. This would initially be limited to resale price maintenance and small business collective bargaining (where the value of the relevant conduct does not exceed NZD3 million per participant over 12 months) and is intended to provide a faster, cost-effective alternative to seeking authorisation.

There are currently no decisions in New Zealand where a franchisor has been held jointly liable with a franchisee for claims by employees. There is only one decision where a franchisor has been considered for joint liability with a franchisee in relation to an employee’s claims. In James v Christchurch Glass Ltd [2026] NZERA 462, the Employment Relations Authority considered whether the franchisor could be joined as a “controlling party” under Section 103B of the Employment Relations Act 2000. In that case, the franchisor’s general manger was recorded as the employee’s direct manager in the relevant individual employment agreement. The Authority found that it was “weakly arguable” that the franchisor exercised a degree of employer-type control and direction over the employee to satisfy being a controlling third party. However, the Authority found that it was not arguable that the franchisor had caused or contributed to the employee’s grievances. In any event, the employee’s application to join the franchisor as a controlling party was unsuccessful as the employee had not provided the franchisor with the requisite notice under Section 115A of the Act (meaning the requirements of Section 103B were not met). 

For completeness, in the health and safety space, it is conceivable that a franchisor could be held jointly liable with a franchisee for a breach of the Health and Safety at Work Act 2015 (HSWA). This could occur where the franchisor and franchisee share a health and safety duty in relation to the same matter. Importantly, liability for a breach of the HSWA cannot be indemnified against.

Generally, vicarious liability is confined to relationships of, or akin to, employment and the courts have been reluctant to extend it to a person’s dealings with an independent contractor. Franchise agreements are typically, and deliberately, structured so that the franchisee operates as an independent contractor or proprietor and not as the franchisor’s employee or agent, expressly disclaiming any agency, partnership, joint venture or employment relationship. Accordingly, a franchisor is unlikely to be vicariously liable for loss or damage caused by a franchisee’s conduct towards third parties.

However, a franchisor could be exposed to liability for a franchisee’s conduct in certain circumstances, including under the law related to agency and apparent authority, where the franchisor holds the franchisee out as having authority to act, or make representations, on the franchisor’s behalf. Similarly, a franchisor may incur liability directly, for example for negligent misstatements, misleading or deceptive conduct, or breach of a duty of care it has separately assumed (such as in relation to systems, training, or supply arrangements it controls), rather than liability attributed to it for the franchisee’s conduct as such.

The franchisor/franchisee relationship has been held not to be inherently fiduciary in nature. In the absence of features of control, the relationship is treated as an arm’s length contractual one rather than one from which extended liability for the other party’s conduct will readily be inferred.

A franchisor cannot be held vicariously liable for a breach of the HSWA. A PCBU (Person Conducting a Business or Undertaking) that breaches the HSWA is directly and personally liable for that breach and that liability cannot be transferred to another PCBU.

The parties are free to select the governing law. It is important that the franchise agreement clearly identifies the governing law.

See 8.1 Possibility of a Franchisor Stipulating Non-Local Law.

There is no mandatory content for franchise agreements under New Zealand law.

If a franchisor is a member of FANZ, they are required to comply with the FANZ Code, which includes requirements that franchise agreements contain provisions requiring:

• a cooling-off period of not less than seven days from the date of entry into the franchise agreement (or preliminary agreement, as the case may be) during which the franchisee may, by formal notice to the franchisor (or master franchisee/sub-franchisor, as the case may be) elect to withdraw from the agreement at its discretion;
• both the franchisor (and/each master franchisee/sub-franchisor) and the franchisee to use reasonable endeavours to comply with the provisions of the FANZ Code;
• that the franchisee comply with the laws of New Zealand including all laws relating to employment, health and safety, fair trading and tax; and
• each franchisee to use reasonable endeavours to clearly identify that the franchisee’s business is being operated under franchise from the franchisor, including in all written contracts entered into with customers of the franchisee.

There is no franchise-specific law in New Zealand. However, under New Zealand’s Fair Trading Act 1986 the use of unfair contract terms in certain types of contracts is prohibited. This includes “standard form” contracts where the expected annual value of the trading relationship is less than NZD250,000 (including GST) at the time the contract is formed.

A term may be declared unfair by the court if it meets all three of the following criteria:

• it creates a significant imbalance in the parties’ rights and obligations;
• it is not reasonably necessary to protect the legitimate interests of the advantaged party; and
• it would cause detriment (financial or otherwise) to a party if enforced or relied upon.

In assessing fairness, New Zealand courts must consider the contract as a whole and the transparency of the term. The Fair Trading Act 1986 also provides examples of potentially unfair terms, such as clauses that allow only one party to:

• vary the contract unilaterally;
• avoid or limit performance;
• terminate the agreement; and
• impose penalties.

Certain terms are exempt from being declared unfair, including those that define the main subject matter of the contract or set the upfront price payable.

Enforcement of foreign court judgments in New Zealand depends on whether a reciprocal enforcement regime applies to the jurisdiction in question. Judgments from a limited number of specified countries and courts (largely Commonwealth jurisdictions) can be registered and enforced under the Reciprocal Enforcement of Judgments Act 1934, and judgments from Australian courts and tribunals can be enforced under the simplified regime in the Trans-Tasman Proceedings Act 2010. The Senior Courts Act 2016 provides for the enforcement of judgments for the payment of money from any court of a Commonwealth country, but only if the judgment is not enforceable by the Reciprocal Enforcement of Judgments Act 1934.

Alternatively, if the judgment is not captured by one of these regimes, a foreign judgment may be enforced under the common law. However, while enforcement under the common law may be more efficient than relitigating the substantive dispute, it still likely to involve greater cost and risk than where a reciprocal regime applies.

Foreign arbitral awards are, generally, straightforward to enforce in New Zealand. The recognition and enforcement of foreign arbitral awards is governed by Articles 35 and 36 of Schedule 1 to the Arbitration Act 1996, which effectively incorporate the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). As a result, a party seeking to enforce an award in New Zealand can generally expect a more predictable and consistent process than enforcing a foreign court judgment where no reciprocal enforcement arrangement exists. Irrespective of where it was made, an arbitral award must be recognised as binding and enforced as a judgment on application to the High Court (or District Court where the amount of money does not exceed the threshold for civil cases – ie, up to NZD350,000).

There are no restrictions specific to the franchise sector.

Nonetheless, franchisors should be aware that New Zealand:

• implements United Nations Security Council sanctions – violations can result in severe penalties including fines and imprisonment, as well as commercial and reputational damage (New Zealand banks are generally risk-averse in relation to sanctions);
• has the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, which imposes obligations on certain entities (including financial institutions, lawyers, accountants and real estate agents) to have in place procedures and processes to detect, deter, manage and mitigate money laundering and the financing of terrorism; and
• has a range of import tariffs, taxes and charges which may apply depending on the relevant business area.

New Zealand imposes withholding taxes on interest, dividends and royalties paid by New Zealand residents to non-residents. Franchise fees, royalties and technical service fees may be subject to such withholding taxes if the payments fall within the definitions of interest, royalties or dividends, as defined under New Zealand tax legislation. While New Zealand does not have a specific withholding tax for management fees or technical service fees, the definition of “royalties” under domestic legislation is broad and includes payments for know-how. Accordingly, the withholding tax on royalties may capture certain types of technical service fees, depending on the exact nature of the activity being compensated.

Royalty withholding tax generally applies at 15% to the gross payment under domestic legislation, which may be reduced to 10% or 5% under an applicable double tax treaty.

Where New Zealand-sourced fees for services that are not characterised as dividends, royalties or interest for New Zealand tax purposes are paid to a non-resident franchisor, such fees may be relieved from New Zealand taxation under an applicable double tax treaty under the standard “business profits” article, unless that item of income is attributable to a permanent establishment of the non-resident franchisor in New Zealand, or unless that item of income is otherwise dealt with in another article of the relevant treaty. 

New Zealand also imposes interim withholding taxes on certain contract payments made to non-residents that perform services physically in New Zealand, although exemptions may be obtained from the New Zealand tax authority if the non-resident establishes that its contract activity is treaty-protected (eg, not attributable to a permanent establishment in New Zealand under an applicable double tax treaty) or falls within certain prescribed limits under domestic tax legislation.

In New Zealand there are no specific laws or regulations (such as exchange control restrictions) in relation to payment of franchise fees. There is no requirement for payment of franchise fees to be made in New Zealand dollars.

Nonetheless, see 10.1 Restrictions or Limits on Franchisee Fees and Royalties regarding what franchisors should be aware of.

There are no formalities specific to franchise agreements; however, normal New Zealand contract law requirements apply, including the need for legal consideration and if there is past consideration. Generally:

• authentication and notarisation of documents is not required under New Zealand law;
• if the franchise agreement is executed as a deed, it will need to comply with the formalities for execution of a deed under New Zealand law; and
• companies will need to execute the agreement in accordance with their constitution.

Under New Zealand law, electronic signatures may be used to execute a franchise agreement, provided certain conditions are met. Specifically, the electronic signature must:

• sufficiently identify the signatory and clearly indicate their approval of the relevant information; and
• be appropriately reliable given the purpose and context in which the signature is required, as outlined in Section 226 of the Contract and Commercial Law Act 2017.

To avoid ambiguity, the franchise agreement should include a clause confirming that electronic signatures are acceptable.

There are no document taxes or stamp duties in New Zealand.