Business Franchise Australia and New Zealand
Hot Topics: Behind the Headlines
Jason Gehrke | Franchise Advisory Centre
Pizza brand to return JobKeeper payments
Pizza brand Domino’s has returned $792,000 in JobKeeper payments received by a subsidiary at the onset of the pandemic, according to a media report.
The CEO of Domino’s offered his thanks to the government and Australian taxpayers for the subsidy which provided “support during a period of significant uncertainty.” A number of other prominent businesses have also made a commitment to return JobKeeper payments, including Super Retail Group ($1.7 million), Iluka Resources ($13.6 million), and Toyota ($18 million).
Franchisees and management buy out real estate chain
The Laing+Simmons real estate chain has been bought by a consortium of franchisees and head office team members from its previous franchisor, according to a company statement.
The New South Wales-based group has 43 real estate offices and has been operating since 1967. A group of 15 franchisees plus head office personnel including current managing director Leanne Pilkington, who is also the current president of the Real Estate Institute of New South Wales, acquired the business for an undisclosed sum.
RFG faces court over misleading and unconscionable conduct
Listed multi-brand franchisor Retail Food Group (RFG) will face the Federal Court for making false or misleading representations and engaging in unconscionable conduct in its dealings with franchisees, according to media reports.
The Australian Competition & Consumer Commission’s (ACCC) case alleges RFG and five of its related entities breached the Australian Consumer Law through false, misleading and deceptive conductive when selling or licensing 42 loss-making corporate stores between 2015 and 2019 and breaching the Franchising Code of Conduct by using
marketing funds for non-marketing expenses. Former franchisees of RFG brands including Michel’s Patisserie, Donut King, and Brumby’s Bakeries have reportedly welcomed the court action.
The ACCC is seeking injunctions, pecuniary penalties, a compliance program order, and costs, among other things. The court action comes more than two years after widespread media reports about the conduct of RFG triggered the 2018 federal government inquiry into the Franchising Code of Conduct. Final changes to the Code arising from the inquiry are expected to be announced by the federal Business Minister in early 2021 (see article below re anticipated changes).
Latest Code version changes URL for free franchisee course
The latest version of the Franchising Code of Conduct released quietly by the federal government on December 15 last year effectively changes only minor references within the Annexure 2 Information Statement for Prospective franchisees.
The changes relate to two websites referenced in the Information Statement. One is an updated URL for potential franchisees to download a copy of the Franchising Code (now at www.legislation.gov.au instead of comlaw.gov.au). The other website change is for the address of the free online education course for potential franchisees which can now be found at www.accc.gov.au/about-us/ tools-resources/cca-education-programs
The free online education program was formerly hosted on the website of the AsiaPacific Centre for Franchising Excellence at Griffith University, which has since closed. The education program is designed to help prepare potential franchisees to better understand their obligations under a franchise, and to conduct more effective due diligence before committing to a franchise.
Past research by the university indicates that potential franchisees who have undertaken this course take on average a month longer to research a franchise before committing and are more satisfied with their decision six months after acquiring a franchise compared to those who didn’t undertake the course. The course was originally written in 2010 by Franchise Advisory Centre director Jason Gehrke for Griffith University.
Franchisors are encouraged to require completion of the course a pre-requisite criteria for potential franchisees. See www. accc.gov.au/about-us/tools-resources/ccaeducation-programs for more information.
Meanwhile, the government is yet to release final changes to the Franchising Code of Conduct following the release of an exposure draft of proposed changes late last year, along with a supporting guide which explains the nature of the changes.
Investor pays $86.8m for 10% stake in Mexican food chain
Australian-based Mexican food chain Guzman Y Gomez (GYG) has sold a 10% stake to listed investment company and specialist funds manager Magellan Financial Group in a deal worth $86.8 million, according to a media report.
The deal is subject to shareholder approval but is expected to be finalised in late January 2021.
Caltex sued by partner over alleged branding deception
Woolworths petrol station network owner, British-based Euro Garages (EG Group), is suing fuel supplier Ampol, formerly known as Caltex, alleging misleading or deceptive conduct related to Ampol’s rebranding, according to a media report.
The lawsuit relates to Caltex’s alleged “false representations” to EG regarding its branding agreement with Chevron, and its failure to disclose that it was already locked into discussions with Chevron about the future of its trademark licence agreement, among other things.
EG reportedly believed it had ongoing rights to use the Caltex brand, when in fact those rights expire on December 31, 2022.
Pandemic drives rapid uptake of virtual food brands
The COVID pandemic has driven a rapid increase in virtual concept food brands which exist only digitally, as apps, or on third-party marketplaces, but service their customers with food produced by actual restaurants for delivery or takeaway, according to a media report.
The trend has taken off in the United States and also reached Australia. Virtual restaurants allow existing food businesses to maximise their capacity and earn extra revenue, with orders either delivered or offered as pick-up only. A virtual restaurant brand in the United
States opened at 300 outlets on its first day of trading late last year.
Café operator and founder fined for underpayments
A company operating a Café 63 outlet in Brisbane has been fined $95,000 for partially paying 11 employees in food and drink rather than full wages, between August 2017 and January 2018, according to a Fair Work Ombudsman (FWO) media statement.
Two principals of the company have also been fined $20,000 each, while the owner of the Café 63 brand has been penalised $4,800 for his involvement in one contravention by the company.
Wage underpayment penalties to increase by 50%
Federal government changes to the Industrial Relations Reform Bill could result in small businesses found guilty of deliberately and systematically underpaying workers being penalised up to 50% more than current civil penalties, according to a media report.
The new penalties will be applied through a three-tier system of underpayments whereby a first-tier penalty will increase from $66,000 to $99,000 for body corporates, and from $13,320 to $19,980 for individuals. Small businesses and individuals are exempt from Tiers 2 and 3, under which larger businesses will be penalised at the higher of two and three times the benefit obtained, or $99,900 and $666,600, respectively.
It is also proposed that for severe cases of intentional wage theft a new criminal offence could carry a jail term of up to four years, fines of $1.11 million, and, for individuals, an automatic disqualification from managing corporations for five years if convicted.