Its time to restore confidence in the franchising industry

26 March 2019

Senator Anthony Chisholm

Senator for Queensland

Deputy Chair

Parliamentary Joint Committee on Corporations and Financial Services

Senator Deborah ONeill

Senator for New South Wales

Matt Keogh MP

Member for Burt

Ged Kearney MP

Member for Batman

Senator Chris Ketter

Senator for Queensland

Its time to restore confidence in the franchising industry

The Parliamentary Joint Committee on Corporations and Financial Services has completed its comprehensive inquiry into franchising in Australia and what was discovered in many cases was nothing short of astonishing, with workers being mistreated, franchisors not being up front with business information and numerous stories of franchisees sold lemon businesses.

Franchising is big business in Australia, contributing approximately 9 per cent of gross domestic product in 2016 and employing thousands of Australians, however this inquiry has highlighted the sheer power imbalance between franchisors and franchisees, an imbalance characteristic of the franchisor - franchisee business structure.

As a result the committee is proposing substantial changes to the Franchising Code of Conduct and the responsibilities and powers of the ACCC is relation to this.

Labors focus of the inquiry was to ensure that workers in these franchises are not ripped off, franchisees are aware of their obligations as an employer and overall that franchisees have a legal leg to stand on to protect themselves against large, often multinational franchisors.

Also of importance is the franchisees right to terminate an agreement.

We heard many instances of franchisees not being provided the full business picture before signing on the dotted line, then when businesses were not as fruitful as expected, they were left significantly out of pocket with no opt out avenue to pursue.

The Committee recommended a raft of exit arrangements be added to the Franchising code of conduct to ensure that in extenuating circumstances the franchisees can terminate their agreements with the franchisor.

To support this the committee also recommends an amendment to the code of conduct to require, as part of mandatory disclosure a reasonable estimate of the personal workload to be undertaken by the franchisee so they and their staff are not subject to any nasty surprises.

The changes recommended in this report are designed to lift standards and conduct across the industry and to rebuild confidence in franchising, and the security of small business in Australia.