Back In Motion Physiotherapy Pty Ltd

The Australian Competition and Consumer Commission (ACCC) has accepted a court enforceable undertaking from Back In Motion Physiotherapy Pty Ltd (Back In Motion), in relation to certain terms in its standard form franchise agreement that may be unfair within the meaning of section 24 of the Australian Consumer Law (ACL).

Back In Motion is a franchisor with a network of franchisees who provide physiotherapy and related services in Australia and New Zealand.

Back In Motion’s franchise agreement contains a restraint of trade term that has the effect of restricting franchisees, on exiting the franchise system, from offering physiotherapy services within a 10km radius of any Back In Motion franchise site throughout Australia for 12 months. Given the number and location of franchise practices, this term could effectively prevent former franchisees from offering physiotherapy services in most metropolitan areas in Australia.

The term is also drafted in a manner that causes uncertainty as to the extent franchisees are restricted from offering physiotherapy services, given it is made up of a series of cascading definitions of ‘Restraint Area’ and ‘Restraint Period’. The cascading restraints range from 10km from any Back In Motion site in Australia for 12 months to 3km from the former franchisee’s site for a period of 3 months.

The franchise agreements also included a clause under which franchisees could elect to pay Back In Motion a ‘buy out fee’ equal to four times their annual royalty fees, in order to be released from the unfair restraint of trade.

Back In Motion has provided the ACCC with a section 87B undertaking that includes, among other things:

• an admission that the restraint of trade and buy-out fee terms may be unfair within the meaning of section 23 and 24 of the ACL;
• Back In Motion will not include, enforce or purport to rely upon the unfair terms in current or future agreements with franchisees; and
• Back In Motion will write to all affected current and former franchisees, informing them of the terms of the undertaking and that the restraint of trade and buy-out fee terms will not be enforced against them.