Franchisor abandons mortgage broking brand
Big Four Australian bank Westpac has closed its mortgage broking brand RAMS Financial as part of a strategic review to simplify the bank’s business, according to a media report.
While new home loan applications have been closed, Westpac says customers of RAMS will not be affected by the closure. RAMS’ customer loans will reportedly remain in place with customers able to continue to access services through the RAMS’ app, call centre, and website. The bank will also provide franchisees with “mutually agreed support” and RAMS’ employees with ongoing opportunities within Westpac.
The bank acquired RAMS in 2008 for $140 million at the onset of the global financial crisis. When Westpac announced in May its intention to sell RAMS an independent market source indicated that it may be worth less than 10% of what Westpac originally paid for it. Westpac cancelled the sale after failing to secure an acceptable bid and, in the same month, disgruntled RAMS’ franchisees launched a class action lawsuit related to the termination of some franchise agreements. Meanwhile, RAMS is under investigation and review by the Australian Securities and Investments Commission (ASIC) over home loans which may have contravened credit rules. The review was initiated in September 2023 after Westpac self-reported to ASIC some issues in relation to home loan applications. Read more
Burger chain collapse drives competition for locations
The Australian master franchisee of US burger chain Carl’s Jr, CJ’s Group, has gone into voluntary administration closing 20 stores immediately and impacting hundreds of employees, according to a media report.
CJ’s Group independently owns and operates 24 Carl’s Jr. restaurants as a licensee of Carl’s Jr. restaurants in Australia while also serving as the master licensee to 25 third-party independently owned and operated restaurants.
The 25 sub-licensed restaurants are unaffected by the administration and will transition to a direct licensed relationship with Carl Jr.’s US parent company CKE Restaurant Holdings, Inc. Meanwhile, 20 of the 24 restaurants owned and operated by CJ Group have been closed as of the date of appointment of administrators with the remaining four outlets operating on a business-as-usual basis. Read more 1; Read more 2
Meanwhile, the collapse of Carl’s Jr. effectively puts up to 24 restaurant outlets and several undeveloped sites on the market with industry analysts suggesting rival chains including Domino’s, Hungry Jack’s, KFC, and McDonald’s might be interested in the properties, according to a media report.
While CKE reportedly intends to continue expanding in Australia and may be interested in the sites vacated by CJ’s Group Carl’s Jr. restaurants, rival brands recognise that not only are the vacated sites well located, but they are also complete functioning sites thereby eliminating the costs associated with new builds. Read more
ACCC reminds franchisors about EOY obligations
The Australian Competition & Consumer Commission (ACCC) has reminded franchisors that they are required to prepare or update a number of documents within four months of a company’s financial year end.
Franchises with a marketing fund must give their franchisees an annual marketing fund financial statement and an auditors report of the statement, unless franchisees have agreed not to have it audited. In addition, franchisors must update their disclosure document and key fact sheets to keep their franchisees updated and informed.
For most franchisors operating in Australia, these updates are due by 31 October 2024.
Union win in courier franchise case
A case brought before the Industrial Relations Commission of New South Wales by the Transport Workers Union (TWU) against a large master franchisee of courier chain Aramex has found in favour of the union, according to court documents.
The TWU argued that charges to franchisees for the use of tracking scanners were not reasonable as they were necessary for the operation of the business, despite being claimed as optional by the master franchisee. The union also argued that fees charged to the franchisees to sort packages for delivery in the master franchisee’s distribution centre were a cost for the master, not individual franchisees, which the court supported. The court also supported a union argument that fees to cover contracted couriers were a matter for the master franchisee, and not able to be charged to individual franchisees.
The court has ordered the parties to give effect to its determination by agreement between the parties. Read more
US franchise regulator toughens approach
The Federal Trade Commission (FTC) which regulates franchising nationally in the United States, has indicated a policy shift toward the sector, and increased regulatory activity, according to a media report.
The FTC has recently released a policy statement related to a franchisor’s inclusion and/or use of specific contract provisions including non-disparagement, goodwill, and confidentiality clauses. It has also released a guidance related to franchisors charging franchisees undisclosed fees, as well as an Issues Spotlight detailing the top 12 complaints from franchisees. The agency has reopened its 2023 Request for Information for franchisees, franchisors, and other stakeholders, until 10 October 2024 to provide input about the US franchise sector. The FTC also released inflation-adjusted investment thresholds which determine the trigger point when disclosure is required under the Franchise Rule. Read more
Auto group rejects buyer, hires executive chairman
Multi-brand automotive franchisor Bapcor has rejected private investment firm Bain Capital’s unsolicited, conditional, and non-binding bid of $5.40 per share for the business, according to a media report.
Rejecting the all-cash $1.83 billion buyout offer, Bapcor has instead appointed a new executive chairman who will assume the company’s reins in August. Angus McKay, the former chief executive of 7-Eleven Australia, has been tasked with turning Bapcor around after three profit downgrades in 12 months.
Shares in Bapcor fell more than 4% on news of the offer being rejected. Read more
Auto group rejects buyer, hires executive chairman
Multi-brand automotive franchisor Bapcor has rejected private investment firm Bain Capital’s unsolicited, conditional, and non-binding bid of $5.40 per share for the business, according to a media report.
Rejecting the all-cash $1.83 billion buyout offer, Bapcor has instead appointed a new executive chairman who will assume the company’s reins in August. Angus McKay, the former chief executive of 7-Eleven Australia, has been tasked with turning Bapcor around after three profit downgrades in 12 months.
Shares in Bapcor fell more than 4% on news of the offer being rejected. Read more
Huge stock exchange debut for GYG
Australian-based Mexican food chain Guzman y Gomez (GYG) has listed on the Australian Stock Exchange (ASX) closing 36% above what investors paid to participate in the initial public offering (IPO), according to a media report.
The IPO, underwritten by investment banks Barrenjoey Markets and Morgan Stanley, offered investors shares at a set and guaranteed price of $22 per share. GYG shares closed at $30 on its trading debut, creating a market value of more than $3 billion.
Co-founders and long-term executives and investors in the company celebrated the IPO’s success but were also quick to note that they had been working hard in the business for 20 years. Proceeds of the float have been earmarked for the chain’s expansion in Australia with 30 new restaurants planned to open in the 2025 financial year, and more than 1,000 in the next 20 years. Read more 1; Read more 2
Insights into resolving franchise disputes
A two-part workshop to explore the topic of Resolving Franchise Disputes will be held in October.
The interactive and live online workshop will be conducted by the Franchise Advisory Centre in two parts on October 15 and 17 from 1pm-3pm AEDT, and will include strategies and tactics to avoid disputes and repair franchise relationships, as well as content on common causes of disputes, methods to avoid unnecessary escalation, maintaining continuity of support services during disputes, and the importance of trust, transparency and respect in the franchise relationship. For more information, visit www.franchiseadvice.com.au/resolving-franchise-disputes.
Jason Gehrke 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, 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