Behind the Headlines
Pandemic the “Great Accelerator” of retail change
Retailers are describing the COVID-19 pandemic as the “great accelerator of retail change” as they invest in technology, modify their supply chains, and customise their offerings to comply with restrictions, protect staff and customers, and financially survive the crisis, according to a media report.
Drive-throughs, click-and-collect, and contactless and home deliveries have become essential for businesses in the QSR sector, while adopting a sovereign mindset and sourcing products locally has been identified as important across many sectors. Longer term, increased online retailing may see a significant decrease in bricks-and-mortar businesses. Read more
Fitness chain sues rival over diverted franchise sales
Australian fitness franchise F45 is suing local rival Body Fit Training claiming it suffered financial loss from franchisees purchasing a Body Fit Training franchise instead of an F45, according to a media report.
F45 is alleging an infringement of its innovation patents relating to the management of its franchises through a central computer system and has requested Body Fit Training produce documentation detailing its training software, exercise video database, and suggested classes.
Body Fit Training is countering the suit by emphasizing differences between the fitness training programs, services, and resources offered to clients. F45 recently deferred plans for a stock exchange listing following the coronavirus pandemic. Read more
Hertz US operations files for bankruptcy
Global car rental franchise Hertz has filed for Chapter 11 bankruptcy in the United States after talks with creditors failed to realize financial relief and the company struggles with the effects of the COVID-19 event, according to a media report.
Hertz, which has been in business for more than a century and has more than 35,000 employees worldwide, is carrying nearly US$19 billion of debt. COVID-19 restrictions limiting travel and requiring citizens to stay home have decimated the business which includes Dollar and Thrifty car-rental brands. Hertz’s Australia, New Zealand, and Europe operating regions are not included in the US proceedings. Read more
Sushi franchisees and head office staff fined for underpayments
The Federal Court has penalised the operators of three Hero Sushi outlets $891,000 for supplying the Fair Work Ombudsman (FWO) with false records and underpaying 94 employees a total of $700,832.88, according to an FWO media release.
Underpayment of minimum hourly rates, casual loadings, penalty rates, overtime, clothing allowances, and annual leave entitlements occurred between April 2015 and July 2016 in three outlets in NSW, Queensland, and the ACT. Many of those affected were young overseas workers and the FWO is holding back-pay for those workers who they have yet to locate.
The company directors, owners, and operators of the outlets have been penalised, as have three payroll officers employed at Hero Sushi head office. Read more
GM forced to negotiate with Holden dealers in good faith
General Motors Holden (GM) has committed to negotiating with its dealers in good faith over compensation related to the company’s decision in February to exit the Australian market, according to an Australian Competition and Consumer Commission (ACCC) media release.
The ACCC had initiated investigations into GM and was preparing for court action after receiving complaints that the company was placing undue pressure on dealers by imposing unnecessary deadlines for the acceptance of proposed compensation packages. GM is required to operate under the good faith obligations of the Franchising Code of Conduct and the unconscionable provisions of the Australian Consumer Law. Read more
Caltex Australia to rebrand to Ampol
Listed fuel retailer Caltex Australia will be rebranded as Ampol in a transition expected to be finalised by the end of 2022, according to a media report.
Shareholders voted in favour of the name change, which will see the 80 year old Ampol brand return to Australian service stations, and save Caltex paying ongoing license fees to international fuel giant Chevron for use of the Caltex brand. Read more 1; Read more 2
Deduction for franchisee’s prepaid rent rejected by ATO
Prepaid rent payments made by a family trust operating seven McDonald’s restaurants in NSW have been ruled by the Federal Court as outgoing capital and, therefore, not claimable in annual returns, according to a media report.
The Court considered the trust’s franchise agreement which included provisions for upfront payments related to turnover to secure a reduced monthly rent; pre-paid rent payments of nearly $10.5 million spread over 10 years; and an audit by the Australian Taxation Office (ATO) which denied the deductions, issuing amended tax bills for the trust for FY2012 – 2015.
The Federal Court agreed with the ATO that the payments secured a more profitable business structure through a reduction in ongoing costs. The ruling may have implications for other franchisees in Australia. Read more
ACCC provides COVID-19 and good faith guidance to franchisors
A new page on the Australian Competition and Consumer Commission (ACCC) website provides guidance to franchisors and franchisees about acting within the law on issues arising from the COVID-19 pandemic, as well as good faith obligations under the Franchising Code.
The page, which can be found here, covers issues dealing with supply, pricing and refunds, as well as the application of franchise royalties and guidance questions to help franchisors and franchisees identify good faith issues in franchising. While the requirement to act in good faith has existed in the Franchising Code of Conduct since 2015, it is not defined in the Code and one of it the Code’s least understood provisions. Read more
National tyre chain breaches Franchising Code
National tyre retail chain Bob Jane has given court-enforceable undertakings to the Australian Competition and Consumer Commission (ACCC) to comply with the Franchising Code of Conduct in relation to the renewal and extension of franchise agreements, according to an ACCC announcement.
The ACCC alleged Bob Jane failed to notify some franchisees whether it intended to renew or extend their franchise agreements at least six months before their expiry date, as required by the Code, and that the company failed to provide required documentation to franchisees beforehand.
Bob Jane has agreed not to terminate any franchise agreements operating under interim arrangements without providing six months’ written notice, and will implement a compliance program for three years. Read more
Retailers authorised for collective negotiation with landlords
Current and future members of the Australian Retailers Association have been granted an interim authorisation by the Australian Competition and Consumer Commission (ACCC) to collectively negotiate rent relief with landlords during the COVID-19 pandemic.
The ACCC authorisation is designed to assist tenants and landlord reach a fair outcome which will also more broadly benefit the public. The authorisation is voluntary and temporary and allows retailers to share information relevant to negotiations including information requested by landlords, among other things.
Camping chain goes into voluntary administration
Camping supplies franchise Aussie Disposals has entered administration citing the summer bushfires and the coronavirus as key drivers for the company’s insolvency, according to a media report.
The company expects to close up to 12 of its 36 stores, with a restructure leaving 11 corporate stores in operation. The chain’s franchised stores are not directly affected by the insolvency. Read more
Franchise fraudster’s COVID-19 bail claim denied
The jailed founder of failed whitegoods retail franchise Kleenmaid has been denied bail after applying to be released on the grounds that the correctional centre where he is being held is too dangerous during the coronavirus crisis, according to a media report.
Andrew Eric Young, who claims to have a heart condition, is in prison waiting to appeal his conviction for knowingly operating Kleenmaid while it was insolvent, and for defrauding the Westpac Bank of $13 million prior to the 2009 collapse of the franchise. Young was jailed in February this year after several aborted trials. His brother and another director of Kleenmaid were previously found guilty of the same charges and have already served much of their jail sentences. Read more