Behind the Headlines with Jason Gehrke – Mar/Apr 2019

 

Dealer code proposal may pre-empt inquiry recommendations

A government department has floated the idea of a separate industry Code of Conduct for automotive dealers ahead of the final report of the current Franchising Inquiry.

Currently, car dealers and manufacturers are covered by the Franchising Code of Conduct, but dealers are pushing for the creation of a separate industry-specific code. The Department of Industry, Innovation and Science is seeking input from independent car dealers on the concept and has released a Regulatory Impact Statement (RIS) addressing the ‘power imbalance between independent dealers and car manufacturers’.

Changes being considered by the government could be implemented with changes to the current Franchising Code, but the government appears to be committed to an industry-specific code, although it is unsure whether it would be binding or voluntary. Recommendations from the Franchising Code Inquiry are due to be released on February 14, 2019.

ALP to introduce fines up to $10m for unfair contract terms

The Australian Labor Party (ALP) has announced that it will introduce fines of up to $10 million for businesses that impose unfair contract terms on other small businesses, according to a media report.

The move will likely impact franchisors should the ALP win government at the next federal election, due later this year, and is already supported by the Australian Competition and Consumer Commission (ACCC) which has called for fines to discourage large organisations from using unfair contract terms in their legal agreements. Currently, unfair contract terms can be struck down, or potentially void an entire contract following court action, however the ACCC argues this not enough of a disincentive for unfair contract terms to still appear in agreements.

Code’s first good faith prosecution results in $2.6m fine for franchisor

Automotive service and roadside assist franchise Ultra Tune has been fined $2.6 million in the Federal Court, for breaching both the Franchising Code of Conduct and the Australian Consumer Law (ACL), according to media reports.

Ultra Tune breached the ACL by making false or misleading representations in dealings with a prospective franchisee, including with regard to the price of the franchise, the age of the franchise, and incorrectly claiming that a $33,000 deposit was refundable. Breaches of the Franchising Code to ‘act in good faith’ included failing to prepare marketing fund statements on time and failing to supply these statements and audit reports to franchisees. The company was also found to have attempted to mislead the court by claiming it had sent disclosure documents to prospective franchisees when it had not.

This is the first time the Australian Competition and Consumer Commission (ACCC) has brought proceedings against a franchisor over the Franchising Code’s obligation to act in good faith, which was introduced when the Code was updated in 2015.

Coffee franchisee fined $140,000

The franchisee of a Degani cafe in Melbourne has been fined more than $140,000 for underpaying staff and falsifying records, according to a statement from the Fair Work Ombudsman (FWO).

The underpayments totalling $12,506 occurred over a nine-week period in 2016 and were uncovered by the FWO during a ‘proactive audit activity’ of Degani in 2018. The affected employees – four teenagers and four adult migrant workers – have been back-paid in full. The FWO claimed the franchisee’s actions were deliberate as he was aware of his legal obligations at the time, had completed a FWO online training course, and had received advice from the franchisor.

Bank loan reprieve for RFG

Listed multi-brand company Retail Food Group (RFG) has had its December 2018 debt covenant tests waived for the third consecutive quarter as the company continues to work on its debt restructuring, according to a media report.

The besieged company, which includes brands such as Gloria Jeans and Donut King, notified the Australian Securities Exchange (ASX) in late December that its lenders ‘had agreed to waive testing whether it had breached its debt covenants’.

RFG maintains that the board is focused on the company’s balance sheet and is considering asset sales as a solution to their financial position. In August 2018, RFG’s main creditors, Westpac and National Australia Bank, together with other lenders, gave the business until October 2019 to refinance its debts.

Fast food worker sues over cigarette roof fall

An employee of fast-food chain McDonald’s has successfully sued the company after breaking her leg in 2016 falling from a ladder she’d used to climb for a pre-shift cigarette on the roof of the restaurant, according to a media report.

The McDonald’s store policy required employees to arrive ten minutes earlier than their shift and the employee regularly used that time to access the restaurant’s roof using a three-metre ladder from which she slipped and fell. Her compensation claim had been rejected by WorkCover and, subsequently, by the Queensland Industrial Relations Commission. However, a Justice for the Industrial Court of Queensland has ruled that employees, despite not being able to perform any duties from the time they were required to arrive until their shift started, ‘had, in my view, commenced work’.

Planning underway for 2019 Leadership and Marketing Forums

Planning for the Franchise Advisory Centre’s annual Leadership Forum in June, and the Marketing Forum in November, is currently underway, with suggestions for speakers and topics now open from current, past or future participants.

The Leadership & Management Forum, to be held in Brisbane on June 5, will focus on high- level issues affecting franchisee and franchisor performance on the theme of Managing Transformational Change and is designed for franchisor CEOs and leadership teams. The Marketing Forum on November 13 showcases best practices in marketing strategies and tactics and case studies of campaigns that have produce outstanding results for franchisees. The Forum is a specialised professional development event for franchisor marketing managers and teams.

To suggest speakers, case studies or topics for either Forum, please email events@franchiseadvice.com.au.

Former 7-Eleven franchisee found guilty of cashback scam

A former 7-Eleven franchisee in Melbourne has been found guilty of exploiting migrant workers by forcing them to repay part of their wages in cash, otherwise known as a cashback scam, according to a Fair Work Ombudsman (FWO) prosecution.

The Federal Circuit Court found that Xia Jing Qi Pty Ltd, its director and a store manager, exploited Chinese students by initially underpaying them, and subsequently paying them the correct rate through the 7-Eleven payroll system but forcing them to repay thousands of dollars of wages in cash. The company was fined $154,225 for the exploitation, and a similar amount for exploiting another worker at a restaurant it also owned.

Starbucks founder considers independent bid for US President in 2020

United States media outlets are speculating that the founder and former CEO of international coffee chain Starbucks, Howard Schultz, will contest the 2020 presidential election as an independent candidate. Schultz has been a vocal critic of current President Donald Trump, although senior Democrats fear that such a move will split the non-Republican vote and ‘all but guarantee’ Trump’s return to office.

www.franchiseadvice.com.au