BEHIND THE HEADLINES

Behind the Headlines with Jason Gehrke Business Franchise MarApr17

 

Franchising Code $10m fines take effect

Legislation to increase fines for breaches of the Franchising Code of Conduct to $10 million or more, as well as to double fines other under industry codes took effect from September 13, according to a government website.
The Treasury Laws Amendment (2021 Measures No. 6) Bill 2021 passed both houses of parliament on September 2, and received Assent (the final stage of the legislative process) on September 13.

Franchisors now face the risk of financial penalties for Code breaches that can be the greater of $10 million, or three times the value of the benefit that caused the breach, or 10 per cent of the franchisor’s turnover for the 12 months prior to the breach. Breaches of the Code not otherwise captured by the new fines will be subject to a doubling of penalty units from 300 to 600 penalty units, which based on the current value of a penalty unit means fines of up to $133,200. Maximum penalties for individuals have also been raised to $500,000.

 

 

An updated version of the Franchising Code showing the increase of penalty units from 300 to 600 is yet to be released.

The new fines impact all franchisors, despite being initially targeted at auto manufacturers in the wake of changes to auto sales models and Holden’s departure from the Australian market in 2020. Ironically, the new fines came into effect on the same day that public consultation into a potential new Franchising Code specifically for the automotive industry closed.

The legislation also included a new amendment to recognise that industry codes can confer powers and functions on third parties that assist in administering or regulating functions of these codes. Key Facts Sheet now available as downloadable PDF

The Australian Government has released an updated version of the Key Facts Sheet, which can still be accessed as an online smart form, but now also as a PDF file that can be downloaded and completed offline, according to an ACCC announcement.

The Key Facts Sheet was introduced with the latest changes to the Franchising Code of Conduct that came into effect on 1 July, and must be given to a potential or renewing franchisee along with other disclosure information at least 14 days before entering into a franchise agreement. It contains important information drawn from the disclosure document, and must be provided in PDF or smartform format provided.

Franchise Disclosure Register details announced Franchisors will be required to upload their disclosure documents to a publicly-accessible register from next year, however will be able to redact certain parts of the documents according to new guidelines released by the Australian Government.

The online Franchise Disclosure Register will be operated by the Government, but will not vet or check documents before they are uploaded. Franchisors will be responsible for the accuracy of all information contained in their disclosure documents, with access to the online register available for free to any member of the public.

The Disclosure Register is expected to be ready to receive documents from March 31 next year, and will be voluntary for several months before all brands must upload current disclosure documents by October 31, 2022. Franchisors will be required to open an account on the Register and provide basic information about themselves before uploading their disclosure documents, and any other supporting documents that may be required.

The Franchising Code of Conduct will again be changed to recognise the role of the Disclosure Register, with the draft changes currently open for public consultation until October 29.

An Explanatory Statement about the Register, as well as a plain English guide featuring eight questions for public consultation has also been released.

Business Minister Stuart Robert says the register will help potential franchisees to conduct due diligence and make informed business decisions, and builds on recent reforms to the Franchising Code of Conduct which includes doubling financial penalties, the introduction of new $10 million fines, and increasing the cooling-off period from seven to 14 days, as well as extending it to franchisee to- franchisee sales, among other things.

Franchisors will be permitted to redact some information before uploading disclosure documents, including personal information in deference to the Privacy Act, site-specific information, and commercially sensitive quantitative information about rebates from suppliers (but potentially not the list of suppliers itself). The Register will not retain past versions of disclosure documents, and all franchisors will be expected to maintain a current disclosure document on Register unless they have ceased offering franchises.

Franchisee class action settled for $98m

Convenience 7-Eleven is reported to have settled a class action with a group of its franchisees for $98 million, according to a media report. The class action reached a non-binding in principle agreement to settle earlier this year that was subject to the approval of the Federal Court and subject to an agreement of the terms of a settlement deed, according to a media report.

The process began in 2017 when a group of current and former franchisees alleged contract breaches, misleading and deceptive conduct, and unconscionable conduct by the company. Additional allegations were also made that the ANZ bank had provided loans that were unsustainable.

Jim’s launches jab merch giveaway incentive

Home services company Jim’s Group is offering fully vaccinated Australians a one-ofa- kind shirt and bucket hat emblazoned with the slogan “Jim’s Jabs” as an incentive to get vaccinated, according to a media report. Founder Jim Penman announced the merchandise giveaway on social media platform Tik Tok, telling viewers to upload their vaccination certificate on social media with the hashtag Jim’s Jabs to claim the shirt and hat. While the initiative received many positive comments from viewers some franchise owners who disagree with the concept reportedly threatened to sell their businesses.

Free courses to help franchise workplace compliance

Two short online courses developed by the Fair Work Ombudsman have been released to help Australian franchisors and franchisees understand and comply with workplace laws. One course is designed for franchisors to understand and manage their obligations under laws including the Protecting Vulnerable Workers Bill, which creates liability for franchisors if franchisees fail to pay their workers correctly. The other course is specifically targeted at franchisees to understand their obligations when employing staff.

Both courses are free, and will take about 30 minutes each to complete.

Car franchisor moves to fixed price agency model Japanese car manufacturer Honda has moved to a fixed-price agency model for its dealerships in Australia, which means that customers will pay the same price regardless of where they buy a new car, and no longer need to haggle for the best deal, according to
company statement.

The fixed-price approach is backed by a price promise that removes concerns that a car will go on sale at a lower price after purchase. The Honda agency model is backed by consumer research which indicates that 90% of new car customers preferred not to haggle, which previously led to a lack of trust in the sale
process.

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