Australian watchdog to swoop on franchise operators

AUSTRALIA’S competition watchdog has embarked on a pre-emptive strike of franchisors ahead of the release of a Senate Inquiry into the Franchising Code of Conduct.

The Australian Competition and Consumer Commission will target cafe, restaurant and take away food services in a series of mandatory checks aimed at ensuring franchisees have been properly informed of the costs of establishing and operating a franchise, as well as any restrictions on supplies, cooling off costs and site history.

“The ACCC receives more franchising code related reports from cafe, restaurant and takeaway food franchisees than any other sector, and for this reason franchisors operating in this sector will be the target of our next round of checks,” deputy chair Mick Keogh said.

Under the Franchising Code, franchisors must disclose certain information so prospective franchisees can make a reasonably informed decision before they purchase a business.

The sector has been under the spotlight in the past year after a series of scandals involving franchisors, including Gold Coast’s Retail Food Group.

Former executives of RFG were reluctantly hauled before a parliamentary inquiry last year as the Federal Government considers whether changes are needed to protect franchisees from unscrupulous companies or systems.

Mr Keogh said ACCC officers would have the power to demand disclosure documents.

“In the last six months, almost a quarter of reports we received about the Franchising Code related to inadequate disclosure,” Mr Keogh said.

“This highlights the need for improved disclosure to prospective franchisees.

“This information is vital as it allows them to make better informed decisions.

“A lack of disclosure may result in substantial harm to the franchisee.”

As part of this initiative, the ACCC will assess important documents franchisors provide to potential franchisees, to check whether they clearly and accurately disclose information that is crucial for potential franchisees to consider before they sign agreements or pay non-refundable money.

The ACCC will share some of its findings at the completion of this project to improve the quality of franchisors’ disclosure in this sector, as well as to assist potential franchisees to understand the information made available, and to ask questions if there is a lack of information.