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Senate report says Australian franchising activities requires drastic overhaul

Senate report says Australian franchising activities requires drastic overhaul
March 15, 2019

A report from the Australian Senate has called for a radical overhaul of the entire franchise sector, recommending civil law penalties be included in a stronger industry code along with greater enforcement power for the Australian Competition and Consumer Commission to help eradicate "exploitative behaviour".

Released this week, the damning Senate committee report has called for better disclosure, particularly around financial performance when franchises are sold, and it has demanded greater accountability about how compulsory marketing levies are spent.

With an estimated annual value of over $135 billion, Australia now more than 1250 franchise systems, and with more franchising outlets per capita than the USA, is now known as the ‘franchising capital of the world’.

Having grown from food and family restaurants, franchising has grown to include practically every type of product and service imaginable, with home-grown concepts accounting for around 90% of the franchise market.

With franchising common in many leisure industry sectors - notably fitness clubs and swimming pool equipment supply - the committee’s call for the Federal Government to establish a taskforce to oversee and implement its recommendations is likely to have some impact.

However, it was the Retail Food Group - which owns the Michel's Patisserie, Gloria Jeans, Brumby's Bakery, Donut King and Crust Pizza franchises – that was subject to the most criticism, with a whole chapter of the 369 page document focusing on its activities and one of the report’s recommendations being for an inter-group investigation by the competition regulator, the Australian Taxation Office and the Australian Securities and Investments Commission into the franchisor’s operations and dealings.

The report cited concerns over issues such as tax avoidance, compliance with company director duties and the Franchising Code of Conduct, Australian Consumer Law, and insider trading.

The report also suggested a new group should be charged to take the committee’s recommendations to the next stage, advising “the committee recommends that the Australian Government establish an inter-agency Franchising Taskforce to examine the feasibility and implementation of a number of the committee’s recommendations.

“The Franchising Taskforce should include representatives from the Department of the Treasury, the Department of Jobs and Small Business and, where appropriate, the ACCC.”

The Franchise Council of Australia welcomed the report, telling its members “two key initiatives that the FCA is supporting is the establishment of a registry of all franchises in Australia, and the mandatory requirements to obtain legal and financial advice prior to entering a franchise agreement.”

According to the Franchise Business website, owning a franchise is “the second great Australian Dream”.

Images: F45 has beein one of Australia's most succesful fitness franchises of recent years (middle) and Jump! Swim School was criticised by a number of dissatisfied franchisees earlier this year (below).

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9th January 2019 - Jump! Swim School responds to media reports of dissatisfied franchisees

8th January 2019 - Investor named Chairman of expanding Fitstop Australia

13th November 2018 - HIIT Factory plans 15 new franchised studios

8th November 2018 - F45 launches new model for youth and over sixties

12th September 2018 - KX Pilates’ opens 50th franchise and first international studio

25th June 2018 - CORE+ launches first franchised studios in Melbourne

28th May 2018 - Sporting ambassadors back new Coaching Zone studio franchise in Sydney

20th April 2018 - Mishfit founder looks to revitalise Curves franchise in Australia and New Zealand

18th December 2017 - Collective Wellness Group adds Xtend Barre to its brand stable

14th December 2017 - Vision Personal Training appoints new Personal Training Operations Manager

23rd October 2017 - World Gym franchise opens in Maroochydore

21st July 2017 - KX Pilates makes a stand on sham contracting

22nd December 2016 - Crunch Fitness partners with Cristiano Ronaldo to launch CR7 gyms

1st July 2015 - Anytime Fitness named number one on annual Top Global Franchise list

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