Behind the Headlines

 

An updated version of the Franchising Code of Conduct was released by the Federal Government on January 28 to include changes flowing from recent amendments to National Insolvency Laws.

 

 

New version of Franchising Code released

 

An updated version of the Franchising Code of Conduct was released by the federal government on January 28 to include changes flowing from recent amendments to national insolvency laws.

 

The changes are minor and technical in nature, and do not change the nature or substance of the Code, however franchisors will be expected to use the new version going forward. The most significant change requires franchisors to notify franchisees of the name and address of any restructuring practitioner appointed to the franchisor or an associate of the franchisor (where associate is already defined in the Code). To download the latest version of the Code (Compilation no. 6, dated 21 December 2021 and registered on 28 January 2022), click here.

 

Union launches $100m claim against McDonalds’ corporate stores

 

The Shop, Distributive and Allied Employees Association (SDA) has lodged a statement of claim against McDonald’s Australia alleging systemic misconduct in contravening workplace rights, according to a media report.

 

The Federal Court action involves 350 workers in company-owned stores seeking $100 million in back pay after they allegedly were not given paid 10-minute breaks under their employment award with the company. The action is the ninth of its type launched by the SDA, however is the first against McDonald’s corporate which operates approximately 15% of the brand’s stores in Australia.  Read more

 

Chicken chain terminates zombie pay agreement

 

Chicken chain Nando’s has terminated an enterprise agreement created in 2008 under which an estimated 1,900 employees have been working without receiving overtime, weekend, or public holiday rates, according to a media report.

 

Despite workers earning less than the Fast Food Industry Award (minimum wage), Nando’s actions were deemed legal in a ruling by the Fair Work Commission because the enterprise agreement was reinstated regularly prior to expiration. Nando’s recently approached Fair Work to cancel the agreement which it described as outdated and out of step with current pay rates. Fair Work has ordered Nando’s to now pay its employees the industry award.  Read more

 

Woolies withdraws bid for pharmacy chain

 

Supermarket chain Woolworths has withdrawn its offer to buy the parent company of pharmacy chain Priceline after its due diligence indicated it would not validate the financial returns required to make the investment, according to a media report.

 

The late development follows a PR war between Woolies and initial bidder Wesfarmers (parent company of hardware chain Bunnings) to convince pharmacists that their respective bids would provide the greatest benefit to pharmacy owners. 

 

In December, Wesfarmers confirmed to shareholders that it would attempt to block grocery giant Woolworths’ rival bid through its 19% stake in Priceline parent company Australian Pharmaceutical Industries (API) which it acquired in 2021 as part of its strategy toward full acquisition of the company. Wesfarmers made it clear it would exercise its vote against Woolworths’ 11th-hour bid for API of $1.75 per share, which is higher than Wesfarmers’ $1.55-a-share deal.  Read more 

 

Wesfarmers contacted the Pharmacy Guild which represents more than 5,700 community chemists across Australia to assure its members that if they acquire API they are committed to supporting the community pharmacy model which determines who can own a pharmacy and prescribes location restrictions, according to a media report.

 

Meanwhile Woolworths sought to deflect concerns it would open pharmacies in its grocery stores by committing to the community-based model.  Read more 1; Read more 2

 

Food chain buys back 50% stake from foreign owner

 

Mexican food chain Mad Mex is 100% Australian owned again after buying back the 50% share it had sold to its Singapore-based venture partner 4Fingers International in 2018, according to a media report.

 

4Fingers had bought into Mad Mex as part of the chain’s expansion into Asia and restaurants were opened in Singapore and Malaysia in 2019. However, the company now wants to focus entirely on an aggressive growth strategy in Australia. Read more

 

Franchise fraudster arrested again

 

Former franchise conman Peter Foster has been arrested at a regional Victorian property after being on the run from police for several months, according to a media report.

 

Foster previously scammed 80 franchisees who invested in bogus weight-loss franchise SensaSlim several years ago and has been involved in numerous other frauds and spent multiple terms in prison for fraud offences in Australia and overseas. A warrant for his arrest was issued in May 2021 when he failed to appear at a scheduled court hearing in relation to fraud of a retired pilot from Hong Kong. The pilot reportedly transferred a total of $2 million in Bitcoin to Foster who was supposedly operating a “guaranteed” online sports trading operation. In 2016 Foster was banned for life from weight loss, franchise industries and managing corporations.  Read more1; Read more 2

 

New online course for potential franchisees

 

The Australian Competition & Consumer Commission has launched a new free online course for potential franchisees covering issues such as the main laws that apply to franchising, what might appear in a typical franchise agreement, and how franchising compares to employment and an independent small business.

 

The course is updated according to the latest changes to the Franchising Code of Conduct. A previous version of the course was undertaken by nearly 20,000 participants between 2010 and 2021.

 

NZ survey shows franchise sales growth

 

The latest survey of franchising in New Zealand has found that sales across the sector account for 12% of national GDP, or NZD$36.8 billion before including motor vehicle or fuel retail industries, which account for another NZD$2.7 billion.

 

The 2021 Franchising New Zealand survey conducted by the Massey University Business School covered the period from March 2020 to April 2021 which aligned with the first 12 months of the pandemic in NZ, but still showed overall sales growth compared to the previous survey in 2017. The survey found there are currently 590 franchisors operating in New Zealand (which is a slight decrease from 631 in the 2017 survey) across 32,500 outlets which employ more than 156,000 people. Read more; Download survey 

 

Franchisor lodges response to franchisee class action

 

Mercedes-Benz Germany has responded to a $650 million class action launched by more than 80% of Australian Mercedes dealers by claiming franchisees are not entitled to anything because franchise agreements were never “evergreen”, according to a media report.

 

Dealers allege Mercedes-Benz forced dealers into non-renewable agreements, decimated the value of their dealerships, failed to operate in “good faith” and are seeking reparations under the Competition and Consumer Act and Australian Consumer Law. A key issue in the legal action relates to a change from a dealership model to an agency model which effectively changes a currently independent retail business into a Mercedes-Benz agent who receives a fixed commission for car sales at a fixed prices. Mercedes-Benz has countered that Australia’s shrinking new car market forced the business model change.  Read more 1; Read more 2

 

 

 

Jason Gehrke | Director | Franchise Advisory Centre Jason is the director of the Franchise Advisory Centre and has been involved in franchising for more than 30 years at franchisee, franchisor and advisor level. He advises both existing and potential franchisors and franchisees, and conducts franchise education programs throughout Australia. He has been awarded for his franchise achievements, and publishes Franchise News & Events, Australia’s only fortnightly electronic news bulletin on franchising issues. In his spare time, Jason is a passionate collector of military antiques. www.franchiseadvice.com.au