Behind the Headlines | Business Franchise Australia

Behind the Headlines

Jason Gehrke, Franchise Advisory Centre

Government issues long-awaited response to Franchise Inquiry

The Australian Government has released its response to the 2018 Franchise Inquiry, nearly 18 months after the Inquiry tabled its final report, Fairness in Franchising, and nine months after consultation ended on a draft regulation impact statement.

The 20-page government response to the Inquiry report does not specifically address the Inquiry’s 71 recommendations—27 of which were referred to a Franchising Taskforce comprised of government agencies to assess in more detail—but does address themes from the Inquiry to cover pre-entry, operational and exit issues in franchise relationships.

The response includes the following highlight items:

  • doubling of penalties that apply for a breach of the Franchising Code (potentially up to 600 penalty units, or $133,200 per breach)
  • the introduction of conciliation and voluntary binding arbitration in addition to mediation
  • further disclosure requirements re supply arrangements (including rebates)
  • marketing funds, exit arrangements and capital expenditure requirements
  • a new Key Disclosure Information Fact Sheet to summarise elements of the agreement
  • a public register of franchisors (yet to be developed)
  • a website for franchisors and franchisees to access information and support
  • an extension of the cooling-off period to at least 14 days after the completion of certain events (ie not just signing the franchise agreement
  • banning franchisors from charging the costs of preparing franchise agreements.

The response does not indicate an implementation timeframe, however past Code amendments have come into effect by the final date that disclosure documents are required to be updated (ie., October 31 for franchisors with a June 30 year-end), or January 1. Read the full report: www.industry.gov.au/sites/default/files/2020-08/government-response-to-t...

Opposition proposes $10m fines for code breaches

The federal opposition has proposed further amendments to the Franchising Code of Conduct, including an increase in financial penalties to a minimum of $10 million, in a bill tabled in Parliament on September 2.

Labor senator Deborah O’Neill, who was a member of the joint parliamentary committee which conducted the 2018 inquiry into the Franchising Code of Conduct, introduced a private bill in the Senate to make up for perceived deficiencies in the Federal Government’s official response to the Inquiry recommendations, which Senator O’Neill described as underwhelming.

The proposed Franchising Laws Amendment (Fairness in Franchising) Bill 2020 includes fines of $10 million, or 10 per cent of the turnover of a franchisor, or three times the benefit received by the franchisors, whichever is higher.

The Bill also seeks to increase the role of the Small Business and Family Enterprise Ombudsman in enforcing the Code, which includes providing optional binding arbitration

 

RFG delivers surprise F20 result

Listed multi-brand franchisor, Retail Food Group (RFG), has achieved its target EBITDA for FY20 at $35.5 million, but achieving a net loss of $4 million due to restructuring costs and asset write downs, according to a media report.

RFG claims its improved financial performance is due to a number of turnaround initiatives designed to stabilise the business and establish a strong foundation for growth which were implemented in the nine months prior to the pandemic. 

 

McDonald’s sues rival over Big Jack burger

Burger chain McDonald’s has taken Federal Court action against fast food rival Hungry Jack’s over a “Big Jack” burger and trademark that McDonald’s claims is deceptively similar to its iconic Big Mac, according to a media report.

The Big Jack burger, which is described in terms very similar to that of the Big Mac, is an act of “bad faith” according to McDonald’s who are seeking to have the Big Jack trademark rescinded, plus damages, and the destruction of all signage and materials featuring the Big Jack trademark. 

 

Judge calls out migrant exploitation in wage fraud case

A trend among employers from “culturally and linguistically diverse backgrounds” to deliberately exploit workers from their own ethnic communities has been highlighted by a Federal Court judge presiding over a wage fraud case, according to a Fair Work Ombudsman (FWO) statement.

The comments were made at an FWO-initiated hearing related to the underpayment of 27 employees of two Hello Juice outlets in Victoria, where the migrant business owner attempted to plead ignorance of workplace laws in an attempt to avoid being penalised. The employees, including 10 juniors, were underpaid a total of $38,458 in 2017. The operators of the stores have been fined a total of more than $240,000 and the general manager has been penalised an additional $34,616. 

 

Coffee and pizza subscription services launched

British-based international sandwich shop franchise, Pret A Manger, has launched an in-shop coffee subscription plan in the United Kingdom, according to a media report.

Costing UK£20, a YourPret Barista coffee subscription covers all drink options including organic teas and smoothies with a limit of five drinks per day.

Meanwhile in Canada, local brand General Assembly Pizza has launched the world’s first online pizza subscription service in Toronto, according to a media report.

A monthly subscription ranges from CAD$39 to CAD$90 for a stack of four to 10 pizzas which are delivered vacuum packed and frozen. Target customers are busy professionals, pizza lovers, and parents, who can cook the pizza in 5-7 minutes in a conventional oven. The service will be expanded throughout Ontario in 2021. 

 

New QLD laws criminalise wage fraud

Queensland’s criminal code has been amended to allow for the imprisonment of employers who deliberately underpay workers, according to a media report.

The new laws which will be enacted before the dissolution of government on 6 October, 2020, were passed without opposition despite some concerns from the LNP that they may “undermine the federal industrial relations system.”  Employers found guilty of wage theft, particularly in a deliberate and systematic way, face up to 10 years imprisonment.

 

Car dealerships move from franchise to agency model

Car dealerships are moving from a franchise model to a fixed-price agency sales model whereby cars displayed for sale are owned by the auto manufacturers and the manufacturers set the prices, according to a media report.

Under such a model, dealers are paid a flat fee and cannot negotiate on price. Brands to adopt the model include Honda in 2021 and Mercedes in 2022, however Ford has reiterated its commitment to strengthening its existing dealer network. 

 

Appeal decision reopens joint employer liability in US

The concept of joint employer liability has reappeared in the United States after a Federal judge ruled on a challenge to a Trump administration workplace law requiring evidence of control to render a parent company as a joint employer, according to a media report.

When a parent company is considered a joint employer it has liability for violations committed by contractors or franchisees, and may be considered responsible for a range of circumstances including the direct control of workers and the provision of facilities and equipment used by employees.

Underpaid workers are often more successful at recouping wages when they sue a parent company which has more resources than contractors or franchisees. In his ruling, the judge described the approach of the current law to liability for parent companies as “flawed in just about every respect.”

 

Coffee chain sued for genital scalding

Coffee giant Starbucks and food packaging manufacturer Pactiv are being sued in the United States for negligence and product liability by a customer whose genitals were allegedly scalded by hot tea, according to a media report.

The plaintiff claims that he finds it painful and awkward to be intimate with his partner after he incurred second- and third-degree burns to his hands, stomach, thighs, and genitalia, when the lid on his tea came loose while it was being handed to him in a drive-through. The lawsuit further alleges that Starbucks was aware of the defective lids and that 80 complaints were made by employees about the packaging each day. 

 

Learn how to make marketing budgets go further

Marketing managers and franchise leaders keen to stretch their marketing budgets further will find great insights and case studies at this year’s Franchise Marketing Leadership Forum, to be held online in the second and third weeks of November.

Held each year since 2010, the Marketing Forum is the only event of its kind dedicated to the specific challenges faced by the marketing managers and leaders of franchise brands.

Normally held in person in Brisbane, the Forum this year will be held online in four parts on Tuesdays and Thursdays in the second and third week of November (ie., November 10, 12, 17 & 19) from 12.30-2pm each day.

The interactive event will feature case studies from leading Australian brands and focus on four key marketing objectives: acquiring new customers, retaining existing customers, internal marketing to franchisees and staff, and marketing to recruit new franchisees.

The Forum includes highly interactive sessions in which marketers can exchange experiences and ideas unique to the challenges of marketing in a franchise group, especially if budgets have been reduced due the impact of the pandemic on a brand.

For more information about the Forum, including this year’s reduced pricing and a further 25% discount available by using coupon code Online25 at registration checkout, visit www.franchiseadvice.com.au/fmf