What to Expect in 2021: Franchising Reform

Franchising

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DATE PUBLISHED: February 3, 2021

In 2019, a bipartisan parliamentary report slammed the franchising sector labelling the Franchising Code of Conduct (‘the Code’) as having ‘manifestly failed’ in its quest to correct the imbalance between franchisors and franchisees. Some 18 months later, in August 2020, the Australian Government responded to that report with its proposed amendments to the Code in its Fairness in Franchising report.  Not long after, the first franchising amendment bill was introduced into parliament, however, as we enter the New Year we are yet to see any movement. 

As they turn their sights on 2021, franchisors and franchisees must standby to see if these last two years of conversation and consultation will result in new law.


1.    WHAT WE’VE SEEN ALREADY

Back in January 2020, we updated you on the further powers given to ASIC and the ACCC to investigate unfair contract terms. You can find that article here

As a preface to their proposed reforms, the Australian Government pointed to this, along with various other recent actions as a demonstration of the measures taken by them so far to strike the balance, including:

  • Establishment of the Franchising Taskforce on 10 April 2019
  • The Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019, which, as the name would suggest, aimed to protect those speaking up on breaches of the Code.
  • Amendments to the Code to provide additional protections for automotive franchises, including provisions surrounding the renewal of agreements.


2.    WHERE ARE WE HEADED

The Government’s Fairness in Franchising report sought to divide their response into what they believed to be the four facets of the franchising experience, being:

  1. Entering a Franchise Agreement;
  2. Operating a Franchise;
  3. Exiting the relationship; and
  4. Code compliance.

The pertinent issues under each were identified, with a combination of legislation reform and industry consultation planned to combat the concerns raised by parliament.

Of the 71 recommendations, 39 demanded government action and 32 were referred for further investigation. Some of the highlights are as follows:

  • Penalties for Franchising Code breaches be doubled to $133,200.00
  • The implementation of a Key Disclosure Document to combat the often overwhelming nature of current disclosure.
  • Providing mediators with the discretion to enforce multi-party dispute resolution processes.
  • Enhancing the Australian Small Business and Family Enterprise Ombudsman’s (ASBFEO) powers to:
    • Report serious or systemic matters to the Australian Competition and Consumer Commission (ACCC); and
    • Appoint franchising advisers to assist in further mediation where mediation has previously failed.
  • Inclusion of a voluntary arbitration option in the disputes resolution process.
  • New provisions enabling early exits from franchise agreements to be more readily negotiated

The Government’s report was perhaps not as exhaustive as the 2019 Parliamentary Joint Committee had called for, yet it still identified and provided for a significant amount of improvement in the franchising sector.


3.    WHAT ARE WE WAITING FOR?

Through the haze of discussion and consultation among the various stakeholders, members of the franchising sector can only wait and watch to see any of the proposed reforms are enacted.

In September 2020, the Opposition introduced the Franchising Laws Amendments (Fairness in Franchising) Bill 2020, which adopts many, but not all, of the Government's recommendations.

At the time of this article, that Bill remains before the Senate without any amendments or votes passed. Watch this space for updates.

If you or your clients require any assistance in the present climate, please contact a member of our Commercial Division.

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