Kyoto: Dragon Head shoe store in Kyoto, Japan. Retail sales amounted to137.6 trillion yen in Japan in 2012.

Update on the Parliamentary Inquiry into Franchising

It is difficult to ignore the immense amount of press surrounding the recent parliamentary enquiry into the franchising sector and the effectiveness of the Franchising Code of Conduct.  The Senate Committee, chaired by Michael Sukkar, has set themselves the task of discovering whether amendments to the Code would result in a more cohesive sector and provide greater support to franchisees.  

If you have not been following the parliamentary inquiry into franchising, you may wish to look over Coleman Greig’s article on the topic published in June 2018: Parliamentary Inquiry into Franchising: What’s Wrong Within the Sector?

Over the past couple of months, a wide range of articles have been published across many of Australia’s major newspapers and online publications relating to the daily struggles of being a franchisee, as well as the mistreatment of franchisees in a system allegedly stacked against small business owners.
However, this is only one side of the story, and one must remember not to ‘paint all franchisors with the same brush’.

Here at Coleman Greig, we work with an eclectic list of franchisors who have healthy working relationships with their franchisees, and who work together with their franchisees to help grow their networks.  The key to making a franchise work and ensuring that it succeeds is to have a franchisor who is effective in leading the entire company in the right direction.  This is vital in ensuring that the combined group of franchisees move together towards their common goal.

Despite growing concerns over the stability of the franchising sector, there are indeed reports that some franchisors are experiencing growth and success stronger than ever.  On this occasion, it may be more of a case of individual franchisors behaving badly, as opposed to the entire franchising sector being at fault.

The Senate Committee has received more than 200 submissions and has held a multitude of inter-state hearings.  While the Committee was due to present their findings at the beginning of December, it decided to take the rare step of issuing summons to three former executives of industry giant Retail Food Group (RFG) to appear at the inquiry.  One of the RFG executives, Tony Alford, has challenged the validity of the summons and has taken action in the High Court on constitutional grounds.  At this time, it looks as though this may further delay the current December reporting date.

For now, it remains unclear exactly what type of changes are likely to come about within the franchising sector, although there has been an abundance of dialogue surrounding the introduction of mandatory legal and business advice for franchisees who wish to buy a franchise, which will improve the effectiveness of the Code’s dispute resolution mechanisms, as well as help to compile an Australia-wide list of both franchising lawyers and advisors to better facilitate legal and business advice.

In the meantime, franchisors should remain proactive and continuously review their business model and agreements, with a focus on being reasonable and fair.  On the other hand, franchisees should protect their own interests by undertaking a thorough due diligence process prior to buying a franchise.

Coleman Greig will continue to monitor the progress of the Senate Committee and provide regular updates in the new year, so please stay tuned.

If you have a query relating to any of the information in this article, or you would like to speak with an experienced franchising lawyer with regard to your own matter, please don’t hesitate to get in touch with Coleman Greig’s franchising team.

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