Australia: The long wait for Australian franchising inquiry findings is over
March saw the release of the Parliamentary Joint Committee on Corporations and Financial Services – Fairness in Franchising report. The report makes 71 recommendations of varying significance, including far-reaching changes to the Franchising Code of Conduct.
Many of the recommendations are innocuous and reflect practices that many of them will have had in place for years, such as providing documents electronically and in hard copy. Additionally, about 40 percent of all recommendations are for a dedicated taskforce comprising members of Commonwealth Government Departments and the Australian Competition and Consumer Commission to consider the proposals further before any legislative action is taken, or that other regulatory bodies consider issues.
Overall franchisors should be alert but not alarmed. The report definitely takes up a variety of concerns raised by franchising participants, and overwhelmingly those of franchisees. Nevertheless, franchisors should definitely take on board some of the concerns raised by both the Committee and the submissions referred to in the Report. This can be done as part of all good franchisors’ efforts to continually reassess their practices to ensure they reflect best practice.
- All franchise agreements should definitely have been reviewed to ensure compliance with unfair contract term laws. There is no excuse for this not having been done.
- Marketing funds should also be being operated and reported on with vigilance. Significant guidance on what courts consider the standards are in this respect and the ACCC’s requirements have been provided, which can easily be incorporated into franchisor’s practices.
- Franchisors should consider providing earnings information with their disclosure document, and ensuring that all cost estimates are as meaningful and accurate as possible.