Processes and Systems – Are they working to keep you on the good side of the ACCC.
Half way through the year and the ACCC are definitely keeping active in the Franchise sector. Following on from our prior blog dealing with the ACCC’s infringement notice against the Domino’s Franchisor, the ACCC has since taken action against the Franchisor of Ultra Tunes and the Franchisor of Geowash.
While both of these franchise systems are dealing with different allegations, they together with the Domino’s case seem to support that the ACCC is taking a particular interest around potential conduct that could amount to a franchisor and/or its representatives:
- engaging in false and/or misleading representations;
- engaging in unconscionable conduct;
- not acting in line with the Franchising Code of Conduct’s obligation to act in good faith; and/or
- using franchisees funds for purposes not permitted under the relevant Franchise Agreement and not disclosed to franchisees.
With Geowash, the ACCC is showing it is more than willing to take action not just against the Franchisor company where they believe any of the above conduct is taking place, but also its directors and/or manager/s who may be regarded as having been aware and involved.
Given the above and it being half way through the year where many franchisors need to start preparing for their annual disclosure update and potentially issuing out notices to franchisees, we want to again highlight the importance for franchise systems ensuring that they are being proactive, that they are regularly asking themselves:
- are the Franchisor and its team, (“we”) aware of and do we understand our legal obligations;
- do we keep up to date with any changes impacting our legal obligations;
- do we have processes and systems in place to manage the potential legal risks and provide the back up to easily show we have met our legal obligations when called upon to do so; and
- do we regularly review and update our processes and systems to ensure they are working and reflect any legal change/s that may come about.
These are just a few factors to be considered, and with the growing ACCC activity that is taking place this year, and the damage, costs and defocus ACCC allegations can cause a franchise network, (even if the allegations are eventually not proven and/or are dropped in full or part), we suggest that the time is right to ask the above questions in consultation with your franchising experienced lawyers to ensure you and your network are protected.
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.