Franchising Updates

Report of Parliamentary Inquiry into Franchising Code Released

An Australian parliamentary committee began an inquiry into franchising in 2018. The inquiry was launched after numerous media reports of widespread unfair treatment of franchisees and crisis in the sector. The committee invited submissions from the public and received more than 400 such submissions. It also conducted a number of hearings.

By far the greatest number of submissions were from franchisees, but there were also submissions from a wide range of other participants in the franchise sector, including franchisors, lawyers, government bodies, franchise associations, franchise consultants and researchers. Some franchisees' submissions were not made public, while other franchisees' names were withheld when their submissions were published.

The Franchise Lawyer made a submission and our submission was referenced in the Committee's report. 

The report of the inquiry was released on 14 March 2019.  

Following its receipt of so much material, the Committee was expected to make a number of recommendations for reform of the sector, and it did not disappoint. At 326 pages, its report is not for the fainthearted. There were about 70 recommendations for change, not only to improve franchisors' disclosure requirements under the Franchising Code of Conduct 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.

Retail Food Group (RFG), which owns high profile franchise brands including Brumby's Bakeries, Gloria Jean's Coffees and Michel's Patisserie, was the subject of many submissions received from franchisees and was singled out in the Committee's report. The report recommended 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. After the release of the Committee's report, a Franchising Taskforce was established to examine the feasibility and implementation of the Committee's recommendations. Subsequently, in 2020, there were changes to the Code affecting motor vehicle dealership franchises. Due to the scope of the other recommendations, it is likely in our view that any other, more general changes to the law affecting franchising will not follow until the end of 2020 or 2021 at the earliest. We await further developments with keen interest.