FCA Calls On Landlords and Food Delivery Platforms to Step Up

Mary Aldred | Franchise Council of Australia

Given the unprecedented challenges for business as a result of the COVID-19 pandemic, the Franchise Council of Australia has been absolutely focussed on providing practical support for members through this period.

The leading priority has been to engage with the government proactively and advocating on the key concerns and issues affecting our members by:

  • Participating as a member of the Federal Department of Treasury’s Coronavirus Business Liaison Unit, which was formed to engage with peak business groups on systemic issues relating to Coronavirus; and
  • Advocating for immediate cash relief and assistance for small businesses and retailers in commercial leasing arrangements.

The FCA is also providing practical resources and ongoing advisory support to members by:

  • Working closely with our expert partner, ER Strategies, to guide members on best practice workplace management and staff deployment in response to COVID-19; and
  • Delivering regular updates, including best practice advice and resources to assist members on a day-to-day operational and business system issues.

FCA’s advocacy for business relief

The unprecedented business restrictions and social distancing measures implemented to combat the spread of COVID-19 have left many businesses unable to trade or need to make a significant change to their business model to survive.

Those businesses who are still able to operate are in many, many cases confronted with a severe drop in revenue which makes a daily review of staffing, stock levels and cash flow an imperative for survival.

The FCA has welcomed government initiatives to support businesses but has called on commercial landlords and delivery platforms to share the financial burden, especially in the hard-hit food retail and hospitality sector.

Commercial leasing and rent relief

The majority of small businesses, both franchised and independent, in commercial leasing arrangements are experiencing significant pressure in meeting rental payments.

The need for regulation of the landlord-tenant relationship in these circumstances is all too evident as, disturbingly, the FCA has been inundated with calls from franchisors and franchisees who have received non-committal responses from landlords after they have sought a pause in rental payments.

These have included Pro-forma letters from landlords asking for a huge amount of detail about the financial situation of tenants, and landlords being deliberately slow in their dealings.

The FCA has advocated strongly for our members directly with the Prime Minister's Office and Treasurer's office on the need for rent relief for tenants through this period and has achieved a number of improved outcomes that are reflected in the new Commercial Leasing Code of Conduct, which has been endorsed by the National Cabinet and will be implemented by state and territory legislation.

The purpose of the Code is to impose a set of good faith leasing principles for application to commercial tenancies (including retail, office and industrial) between owners/operators/other landlords and tenants, in circumstances where the tenant is a small-medium sized business (annual turnover of up to $50 million) and is an eligible business for the purpose of the Commonwealth Government's JobKeeper programme.

National Cabinet agreed that there would be a proportionality to rent reductions based on the tenant's decline in turnover to ensure that the burden is shared between landlords and tenants. The Code provides a proportionate and measured burden share between the two parties while still allowing tenants and landlords to agree to tailored, bespoke and appropriate temporary arrangements that take account of their particular circumstances.

The FCA will continue to provide representation on behalf of the sector and after consultation with members will put any necessary amendments to the states and territories for consideration as part of their final legislation.

Consumers, jobs and small businesses dependant on food delivery platforms halving fees

The FCA has called on food delivery services to halve their fees and share in some of the sacrifices being made by food retail and hospitality businesses.

If food delivery platforms don’t share in some of the pain right now, there won’t be a food retail industry left to support them.

UberEats, which has around an 80 per cent share of the delivery market in Australia, and is a highly profitable business, is charging food businesses around 28 per cent of the total cost to the consumer.

Delivery traffic is significantly up with a little additional fixed cost that delivery platforms need to incur.

Vulnerable consumers who are not able to travel to supermarkets depend on home delivery for many of their supplies, and small businesses who are already under massive financial strain urgently need food delivery platforms to lower their fixed-fee delivery pricing.

A reduction of delivery fees is one of the most significant things that can be done to help franchisees and small businesses in the food industry to survive and provide the best shot at keeping people in their jobs.