2021 – The highs and lows for franchises in the year that was 

As we hurtle towards Christmas after a year of uncertainty and lockdowns, let’s take a pause to reflect on the developments that have impacted the franchising sector in 2021:

January

• • A new version of the Franchising Code – 2021 started with a bang for franchises with a new version of the Code, following its release in the previous December.

February

• • The Franchising Laws Amendment (Fairness in Franchising) Bill 2020 – this Bill passed the Senate on 22 February. The Bill dealt with two of 71 recommendations made in the parliamentary inquiry review. It aimed to address power imbalances between franchisors and franchisees and involved the establishment of a mediation and franchising adviser within the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) and increased penalties for franchisors found guilty of breaching the Franchising Code of Conduct.

March

• • New financial penalties for automotive franchises – The Federal Government announced reforms for franchises in the automotive industry. The reforms made voluntary measures compulsory with multi-national car companies now subject to financial penalties of up to $10 million for wilful, egregious and systemic breaches of the Franchising Code of Conduct.
  • JobKeeper wound up – JobKeeper, the Federal Government’s payment scheme to support businesses significantly impacted by COVID-19, supported many businesses – including franchisees – through until its conclusion on 28 March.
  • Megasave was ordered to pay $1.9 million in penalties – In one of the biggest franchise cases of the year, Megasave Couriers was found guilty of breaching consumer law, and making false or misleading representations to prospective franchisees. Its director was ordered to pay $120,000 for his role. In addition, Megasave and the director were required to pay $500,000 in partial redress for the losses experienced by franchisees.

May

• • The Federal Budget was released – This year’s Federal Budget, handed down on 11 May, was always going to be an interesting one, in light of the pandemic. Measures for franchises included:
    • $4.3 million over four years for a Franchise Disclosure Registry
    • An extension to temporary full expensing
    • An extension to temporary loss carry-back
    • A drop in the corporate tax rate for small to medium businesses
    • A $107.2 million Supply Chain Resilience Initiative
    • Insolvency reform measures for small businesses

June

• • Further amendments to Franchising Code announced – The Federal Government announced further changes to the Code on 1 June including changes to disclosure, increased avenues for dispute resolution, restrictions on restraints of trade, cooling-off and penalties related to breach of payment obligations for marketing funds.
  • Class exemption for collective bargaining – As of 3 June, franchisees no longer need an exemption from the ACCC to engage in collective bargaining.

July

• • New rights for consumers were introduced – An expanded definition of a ‘consumer’ under Australian Consumer Law came into force on 1 July. Under the changes, a greater number of businesses meet the new criteria and as such, enjoy greater legal protections.

October

• • The Franchise Disclosure Register – Details were released on the much anticipated Franchise Disclosure Register. The Register aims to assist prospective franchisees with the due diligence process by providing the information they need to make an informed decision before they enter into a franchise agreement.
  • JobMaker Hiring Credit concluded – JobMaker Hiring Credit supported eligible businesses through incentives for the hiring of new employees aged between 16 – 35. The scheme presented a fantastic opportunity for many franchises to employ younger Australians experiencing job losses as a result of the pandemic.

November

• • Director Identification Numbers introduced – As of 1 November, all company directors are required to have a 15-digit Director Identification Number.

It’s been quite a busy year in franchising. In amongst dealing with a pandemic for a second year running, there have been numerous changes outlining the parameters within which franchises can operate. The great news is that many franchise systems have adapted incredibly well and are on track to maximise opportunities in 2022. We have already seen how some franchisors and franchisees have worked together during a period that has presented unprecedented challenges and that, combined with changes designed to enhance the sector, bodes well for future success.

AS the year draws to a close, we look forward to 2022 and the new opportunities it will bring.

For assistance with your franchise, please contact Baybridge Lawyers’ franchising experts.