This is an update to our April 2018 Article published on the IDI April newsletter on the Senate Franchising Code of Conduct inquiry.
You can find the former article on the IDI website at: https://www.idiproject.com/news/australia-report-senate-franchising-code-conduct-inquiry
Since our Article in April 2018:
- on 4 May 2018, public submissions closed with a total of 216 received from various stakeholders, including, franchisors, franchisees, franchisee associations, legal bodies and private individuals involved in the franchising industry;
- five (5) public Hearings were held, and two (2) further Hearings are scheduled for later this September 2018; and
- the Australian Senate extended the date for the provision of a final report from 30 September 2018 to 6 December 2018.
The franchising sector is a very strong and solid contributor to the Australian economy, with many International and Australian franchisors operating in the best interests not only of the franchisor, but also their franchisees. This is effective recognition that a good franchise, operating to meet its market and efficiently, will be profitable and beneficial to both the franchisor and franchisees.
However, and not surprisingly, given the pressure exerted by certain segments for this further Inquiry, a common thread of criticism in submissions from those advocating reform is a perceived lack of enforcement of the Franchising Code of Conduct. The regulation is by the Australian Competition and Consumer Commission ( ACCC). There are references to the disregard by certain franchisors, allegedly, of their obligations under the Franchising Code. Additionally, it has been said that contractual rights and obligations of the parties to a franchise agreement remain more weighted in favour of the franchisor than necessary.
Submissions have also sought to emphasise that the franchising industry is important to Australia and ensuring that franchisors abide by the Franchising Code, which is generally seen as fair and reasonable, through further enforcement will benefit the industry as a whole.
Certain submissions assert that more franchisees will ultimately be likely to succeed, bankruptcies and liquidation of franchisees reduce, and insufficient disclosure and improper profit modelling should be minimised.
Overall, many submissions reflect a desire for new franchisors to be able to enter the Australian market with confidence in the franchising model and the regulations behind it.
The submissions received by the Committee can be accessed here.
Tony Conaghan, IDI franchising country expert for Australia.