In The News

Thu 10 May 2018

Franchising Inquiry 2018 Here We Go

Legal Services

Those involved in the franchise industry are likely to now be well aware that another National Franchising Inquiry has been called. When you combine the National and State inquiries, this makes this the 6th inquiry into franchising in the last 12 years.

The Parliamentary Joint Committee on Corporate and Financial Services should provide its report on both the Franchising Code of Conduct and the Oil Code (which is also being looked at) by end of September this year.

The terms of reference for the report being:

  • the operation and effectiveness of the Franchising Code of Conduct, including the disclosure document and information statement, and the Oil Code of Conduct, in ensuring full disclosure to potential franchisees of all information necessary to make a fully-informed decision when assessing whether to enter a franchise agreement, including information on:
    • likely financial performance of a franchise and worse-case scenarios,
    • the contractual rights and obligations of all parties, including termination rights and geographical exclusivity,
    • the leasing arrangements and any limitations of the franchisee’s ability to enforce tenants’ rights, and
    • the expected running costs, including cost of goods required to be purchased through prescribed suppliers;
  • the effectiveness of dispute resolution under the Franchising Code of Conduct and the Oil Code of Conduct;
  • the impact of the Australian consumer law unfair contract provisions on new, renewed and terminated franchise agreements entered into since 12 November 2016, including whether changes to standard franchise agreements have resulted;
  • whether the provisions of other mandatory industry codes of conduct, such as the Oil Code, contain advantages or disadvantages relevant to franchising relationships in comparison with terms of the Franchising Code of Conduct;
  • the adequacy and operation of termination provisions in the Franchising Code of Conduct and the Oil Code of Conduct;
  • the imposition of restraints of trade on former franchisees following the termination of a franchise agreement;
  • the enforcement of breaches of the Franchising Code of Conduct and the Oil Code of Conduct and other applicable laws, such as the Competition and Consumer Act 2010, and franchisors; and
  • any related matter.

With submissions having closed 4th May 2018, we are likely to see many parties make submissions in favour or against further regulation.

I would suggest that Australian franchising is already one of the most regulated in the world, where there is the ability to impose significant fines and penalties for non compliance on the relevant franchisor and individuals involved in any breaches. Furthermore, while as mentioned in my last blog, the recent media has raised matters that definitely need to be looked into and considered, overall I suggest that there are many more good news then bad new stories and any proposed further regulation should be carefully considered, with focus instead being on enforcing the regulations already existing.

Please note this brief update, does not purport to be comprehensive advice relevant to your circumstances. Consequently specific legal advice for each of your circumstances should be obtained first before taking or not taking any action in respect to this area.

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