Report

Franchising in Australia: striking a balance or tipping the balance?

29 Nov 2013
Description

A franchise is an arrangement in which a ‘brand’ owner allows a franchisee to trade under that brand and typically either allows, or requires, the franchisee to use the franchisor’s business and marketing systems. This research paper examines whether the former Government’s mooted legislative amendments would effectively address an imbalance in the franchise relationship or be likely to tip the balance in favour of one party to the franchise agreement.

Executive summary

A franchise is an arrangement in which a ‘brand’ owner—the franchisor—allows a franchisee to trade under that brand and typically either allows, or requires, the franchisee to use the franchisor’s business and marketing systems.

The Competition and Consumer Act 2010 (CCA) and the Franchising Code of Conduct (the Code), which is made under the CCA, apply to franchises.

A common characteristic of franchises is that there is an imbalance of power between franchisors and franchisees. Amongst other reasons, this stems from franchisors generally being better resourced and having a deeper understanding of the business than franchisees, as well as having the upper hand in contract negotiations.

Between 2006 and 2008 there were five inquiries at the Commonwealth and state levels into franchising, which sought to address allegations of misuse of power by franchisors. The most significant of these reviews was carried out by the Parliamentary Joint Committee on Corporations and Financial Services, the report of which, entitled Opportunity not opportunism: improving conduct in Australian franchising, called for significant legislative amendments.

Amendments were made to the Code in 2007 and 2010, following which the former Labor Government stated that it did not intend to conduct any further reviews before 2013. On 4 January 2013, the Government appointed Alan Wein to review the Code with particular focus on:

  • the efficacy of the amendments that had been made to the Code in 2007 and 2010 and
  • other matters such as good faith in franchising, the rights of franchisees at the end of the term of their franchise agreements, including recognition for any contribution they have made to the building of the franchise and the operation of the provisions of the CCA as they relate to enforcement of the Code.

This research paper considers the rationale for many of the recommendations of the Wein review and examines whether the former Government’s mooted legislative amendments would effectively address an imbalance in the franchise relationship or be likely to tip the balance in favour of one party to the franchise agreement.

Publication Details
Published year only: 
2013
14
Share
Share
Subject Areas
Geographic Coverage
Advertisement