Bernie Ripoll (Oxley, Australian Labor Party) Share this | Hansard source

On behalf of the Parliamentary Joint Committee on Corporations and Financial Services, I present the committee’s report entitled Opportunity not opportunism: improving conduct in Australian franchising, together with evidence received by the committee.

Ordered that the report be made a parliamentary paper.

As Chair of the Parliamentary Joint Committee on Corporations and Financial Services it gives me great pleasure to table the report Opportunity not opportunism. The committee inquired into the operation of Australia’s Franchising Code of Conduct with a view to identifying justifiable improvements to the code. The committee has made 11 recommendations which are consistent with its overall aim of raising the standard of conduct in Australian franchising.

Franchising is an ongoing relationship between two separate commercial parties, a franchisor and a franchisee. The franchising relationship is based on a prescribed business model which is offered by the franchisor and carried out, under their guidance and oversight, by franchise owners, also known as franchisees. The nature of franchising dictates that each party’s obligations are ongoing and variable, forming an interdependent contract that is fundamentally based on an ongoing relationship. Variable contracts underpinning the franchising relationship can impair the viability and success of individual franchise agreements for the following reasons: firstly, differing expectations about the obligations of each party to the agreement and, secondly, an asymmetric power dynamic within franchise agreements, with potential to lead to abuse of power.

The time during which a prospective franchisee is considering entering into a franchise agreement represents the best opportunity for both franchisee and franchisor to make an accurate and informed assessment about whether this is the right agreement for them. Undertaking unbiased pre-agreement education is important, but even more critical is obtaining sound legal and business advice before entering into a franchise agreement. Although many franchise agreements result in successful and profitable ongoing business relationships, issues arising during the term of the agreement can cause tensions, with the potential to escalate into disputes.

Franchisee expectations about renewal need to be better managed, and the financial implications of nonrenewal better understood, before fixed term franchise agreements are initially signed. Franchise agreements should clearly stipulate what the end of term arrangements and processes are, and these arrangements should be fully and transparently disclosed to prospective franchisees. To specifically reduce disputation around end of term arrangements, the committee also recommends that disclosure provisions in the code be amended to increase transparency before the start of a franchise agreement about what processes will apply at the end of that agreement.

To assist the Australian Competition and Consumer Commission in its enforcement role, the committee recommends the introduction of pecuniary penalties for code breaches. Such penalties would act as a deterrent to unacceptable conduct. The committee also recommends enhancing the ACCC’s proactive investigative powers in relation to potential breaches of the code.

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