Article Category - Commercial Law Advice Buying or Selling a Business 07 March 2019

If you’ve ever thought about purchasing a franchise, there are advantages and disadvantages you may want to consider after a recent inquiry into the operation and effectiveness of the Franchising Code of Conduct.

On 22 March 2018, the Senate referred an inquiry to the Joint Committee on Corporations and Financial Services to investigate the operation and effectiveness of the code in dealing with matters such as disclosure documentation, dispute resolution, unfair contract provisions, franchising relationships, termination provisions, restraints of trade, enforcement of the code and any other incidental matter relating to the Franchise Code of Conduct.

So far throughout the inquiry, over 200 submissions have been made to the committee. Most of these submissions have been made by franchisees. The majority of franchisees who have made submissions have been critical toward the regulation of the franchise sector.

The key complaints by franchisees so far have included:

  • The unfair advantage that franchisors have in any dispute resolution process due to the fact that they have greater access to legal assistance and financial resources; and
  • The length of time it takes to come to a resolution; as the franchisor can be unreasonable during settlement negotiations.

A call has been made for the provision of additional resources to be available to franchisees in order to “level the playing field” when it comes to any sort of dispute resolution process between franchisors and franchisees. They also feel that rather than imposing new business models, products and pricing strategies on franchisees, franchisors should be making a concerted effort to collaborate with its franchise network before imposing those changes. In reference to this arrangement, they also highlight the imbalance of power in franchise agreements.

In next weeks article we will cover some tips and considerations you need to know if you’re thinking about purchasing a franchise now or in the future.

As always, the information provided is for your general information only and we ask you to call our office on 1800 650 656 to obtain detailed legal advice for your individual situation or to undertake our free business legal health check.

Michael McGill | Solicitor