Behind the Headlines

Jason Gehrke | Franchise Advisory Centre

Mowing franchisor offers to pay franchisees' fines for lockdown breaches

 

The founder of home services franchise Jim’s Mowing has reportedly offered to pay any fines issued to his franchisees caught breaching Melbourne’s Stage 4 Covid-19 restrictions, according to a media report.

 

The offer has resulted in a warning from Victoria Police that they will “crack down hard” on Jim’s Mowing and a statement from the Premier that “there will be no mowing your lawns” until mid-September. In a television interview, Jim’s founder Jim Penman accused the Victorian premier of being a tyrant for the draconian measures. 

 

Food franchisor appointed to national COVID Commission

 

The National COVID-19 Commission has appointed Bao Hoang, the founder and CEO of Vietnamese food chain Roll’d, as one of 11 commissioners advising the Australian government on its pandemic response, according to a media report.

 

The Commission was established in late March in response to the first stages of the pandemic and includes businesspeople and entrepreneurs. It has been renewed with a focus on providing advice on implementing the Federal government’s upcoming JobMaker policy which signals changes to industrial relations and vocational training post-pandemic. 

 

General Motors chief defends Holden exit decision

 

The chairman and managing director of Holden parent company General Motoers has defended the company’s February decision to withdraw Holden from the Australian market at a Senate inquiry into its operations in Australia, according to a media report.

 

He denied claims that the decision to withdraw had been made long before the company’s exit was announced and defended the compensation amount offered to Holden dealers, stressing that the investment required in production, technology, and distribution could not be justified for a market that generated only one per cent of GM’s global vehicle sales.

 

General Motors (GM) has also formally declined a request to sell the Holden trademark to Australia, or to any other potential bidder, stating that it intends to use the trademark and brand into the future for service and repairs to existing Holden cars, according to a media report. 

 

Financial advisors launch class action over buyback formula

 

Former financial advisors of AMP’s financial planning arm have launched a class action against the company claiming financial ruin following a change in policy that devalued their businesses by more than one-third and left many in debt, according to a media report.

 

The lawsuit relates to changes made in August 2019 by AMP to a long-standing arrangement with its financial planners known as the buyer of last resort (BOLR). Under BOLR terms AMP agreed to purchase client books of retiring advisors for four times the annual revenue. The new terms reduced this to 2.5 times, a move impacting up to 1,000 former advisors.  AMP announced that the chief executive of its Australian operations left the company this week after less than a year in the role. 

 

Discount retail franchise goes into voluntary administration

 

The Australian master franchisee for China-based discount retailer Miniso has been placed into voluntary administration in a move which directly affects 31 stores, and around 20 others indirectly through stock distribution arrangements, according to a media report.

Miniso Master Franchisee Pty Ltd which operates under a brand licence from a Hong-Kong based company owes creditors an estimated $14.6 million, and is responsible for most of the retailer’s local leases including support offices in Sydney and Melbourne. Negotiations began with administrators in May as the pandemic drove a decline in foot traffic. 

 

200-outlet fitness chain sold

 

The parent company of gym franchise Plus Fitness, which has 190 outlets in Australia plus seven in New Zealand and India, has been sold to listed fitness aggregator Viva Leisure in a deal reported to be worth $18 million, plus a $2 million earnout, according to a media report.

 

Under the deail, the founders of Plus Fitness will be required to continue working in the business for at least 12 months. Canberra-based Viva Leisure was listed on the Australian Securities Exchange (ASX) in mid-2019, and has expanded from an initial 33 outlets to 83 prior to the Plus Fitness acquisition, which is expected to complete by the end of next month. 

 

Franchises fare better than independently owned businesses

 

Research from the United States indicates that franchise businesses are surviving the coronavirus pandemic better than independently owned businesses, according to a media report.

 

Franchisors provide financial assistance such as suspension of fees and leveraging of suppliers while offering competitive advantage through brand recognition and supporting creativity to adapt to change quickly. 

 

Courier brand prosecuted for misleading franchisees

 

Franchised courier delivery business Megasave is being prosecuted by the Australian Competition and Consumer Commission (ACCC) for allegedly misleading prospective franchisees by providing false or misleading promises of payments and income.

 

The false or misleading statements were provided to prospective franchisees via promotional statements and marketing materials, both online and in hardcopy documents, and in communications by Megasave’s sole director and others. The ACCC received complaints from more than 30 franchisees who reported suffering serious financial harm due to Megasave’s conduct. 

 

ASIC concludes investigation into RFG

 

The Australian Securities and Investments Commission (ASIC) has concluded its investigation into multi-brand franchisor Retail Food Group (RFG), notifying the market that no enforcement action will be taken, according to a media report.

 

The investigation related to alleged potential breaches to the Corporations Act referred by a parliamentary committee into the franchising sector in 2019. ASIC retains the right to recommence investigations and/or commence enforcement action if circumstances change.

 

Brands operating under RFG’s umbrella include Michel’s, Gloria Jeans, Brumby’s, Crust Pizza, and Donut King.

 

Surprise changes to Franchising Code released

 

Changes to the Franchising Code of Conduct to provide additional protections for motor vehicle dealerships have been released by the government without fanfare and take affect from June 1, even though the updated version of the Code was only released on June 22.

 

The changes to the existing Code are a surprise development in lieu of a separate, industry-specific Code for motor vehicle dealers proposed under the New Vehicle Dealership Agreements Regulation announced in late 2019, and made available for public consultation in February this year.

 

Instead, new provisions relating to vehicle dealership agreements have been inserted into the existing Code, creating a new Part 5 to the Code and modifying a number of other elements.

 

The changes that apply for motor vehicle dealership agreements provide for a 12-month notice period if the franchisor does not intend to renew a franchisee, a requirement to cooperate on the winding-down of stock levels if the agreement ends, restrictions and disclosure requirements in relation to capital expenditure, and provision for multi-franchisee mediations.

 

Franchisors who have issued disclosure documents since June 1 featuring the previous version of the Code are recommended to provide the new Code, and review their disclosure documents for correct referencing due to changes to the numbering of clauses in the new Code, while those using the ACCC’s Franchisor Compliance Manual will need to check with the ACCC for updates.

 

The new provisions in the Code may impact current negotiations between approximately 185 Holden dealers whose businesses have been impacted by US parent company General Motors’ decision to exit the Australian market this year.

 

To download the latest version of the Franchising Code of Conduct, click here.

 

Franchising Code penalties increase

 

Penalties under the Franchising Code of Conduct, as well as some penalties under the Australian Consumer Law have increased from July 1, according to the Australian Competition & Consumer Commission (ACCC).

 

Penalty units, which are used to determine the size of a financial penalty, have increased from $210 per unit, to $222 per unit. The maximum number of penalty units for a single breach of the Franchising Code is 300, which could mean a financial penalty of $66,600. 

 

New Victorian laws criminalise wage underpayment

 

Victoria has passed legislation to make it a criminal offence to deliberately underpay employees, despite concerns that the laws may be unconstitutional, according to a media report.

 

The new laws due to come into effect in mid-2021 have been criticised by the federal Attorney-General, academics and business organisations who claim there is a risk that people will be prosecuted multiple times for the same offence under new state and existing federal laws. A team of inspectors will be empowered to police the laws which include fines of up to $1 million for businesses and up to 10 years’ jail for offending employers.

 

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