Franchising Updates

Report of Parliamentary Inquiry into Franchising Code Released

The report of the Parliamentary Joint Committee's inquiry into the Franchising Code was released on 14 March 2019. The Committee began its work in March 2018, received more than 400 submissions and conducted a number of hearings before releasing its report. By far the greatest number of submissions received by the Committee were from franchisees, but the remainder were from a wide range of participants in the franchise sector including franchisors, lawyers, government bodies, franchise associations, franchise consultants and researchers. The Franchise Lawyer made a submission and our submission was referenced in the Committee's report.

The franchising Inquiry was launched among numerous reports in the media of widespread unfair treatment of franchisees and crisis in the sector. Many franchisees in fact made confidential submissions to the Inquiry, no doubt for fear of reprisals by their franchisors, and their submissions were not made public, while other franchisees' names were withheld when their submissions were published.

Following its receipt of so much material, the Committee was expected to make a number of recommendations for reform of the sector in its report, and it did not disappoint. At 326 pages, its report is not for the fainthearted. The report contains about 70 recommendations, not only to improve franchisors' disclosure requirements under the Code but also to address fairness after a franchise agreement is entered into, for example by prohibiting unfair contract terms in franchise agreements, to change exit arrangements and to address a raft of other issues. The Committee has also recommended that a public register of franchises be established.

Franchise group Retail Food Group (RFG), which owns high profile franchise brands including Brumby's Bakeries, Gloria Jean's Coffees and Michel's Patisserie, and which was the subject of many submissions received from franchisees, was singled out in the Committee's report. The report recommends investigations into RFG's operations by the ACCC, ASIC and the Australian Taxation Office.

Many of the report's recommendations, if enacted into law, will certainly cause far-reaching changes in the regulation of the franchise sector in Australia. The Committee has suggested that a Franchising Taskforce be established to examine the feasibility and implementation of its recommendations. Due to the scope of the recommendations, it is likely in our view that any changes to the law affecting franchising will not follow until the end of 2019, or 2020 at the earliest. We await further developments with keen interest.