Fairness in Franchising Report – March 2019
The Franchise sector has been eagerly awaiting the recommendations put to the government on the effectiveness of our national regulation, the Franchising Code of Conduct and more importantly, the conduct of those involved in franchising. Nobody is immune to the report which has blatantly, and some may say justifiably, exposed how the sector has reached the lows it has seen for decades.
In may be said that this is what the sector needed. A raw and telling story of what truly has been happening either behind the scenes of what some have clearly seen coming, but not prepared to divulge the underbelly of the sector. Some franchisors have taken the liberty to take self-interest over the interest of its peers, patrons and stakeholders in the franchise community. This conduct has hurt all involved and many have sacrificed. The inquiry, however, is the light we may have needed in the sector.
We are a highly saturated franchise sector in comparison to many other nations
Good practice by those that legitimately work to build strong and successful partnerships will survive and continue to prosper. It will now come with much more compliance and costs, but perhaps with less competition.
The fallout from the report will most certainly mean:
- Greater compliance, including the registration of franchise agreements and disclosure documents to be run by a government agency;
- Better communication by franchisors;
- Penalties being imposed for non-compliance;
- Greater powers to the Australian Competition and Consumer Commission;
- Franchisee association and education;
- More accessible dispute resolution procedures;
- Attempting to create more balance in relation to end of term arrangements.
The recommendations in some cases seem valid and required to address concerns presented in the media to date and on the other hand, shows a lack of sound legal interpretation of the Code and supporting legislation. Nonetheless, it is fair to say that changes will be made.
A task force will be established to consider the recommendations. This will take some time and with elections looming, we would not expect the recommendations to be formalised until mid to late 2020.
What may need to be addressed immediately though is whether or not an inquiry into retail leasing should be entertained before any changes are made to franchising.