Franchising Code review terms of reference released
The terms of reference for the latest review of the Franchising Code of Conduct have been released and indicate an initial focus on the Franchise Disclosure Register, and the Code’s effectiveness in the automotive sector.
Former Australian Competition and Consumer Commission deputy chairman Dr Michael Schaper, who has published books and articles in academic journals on franchising and small business, will conduct the review.
Unlike the 2018 Code Inquiry which was conducted by a joint Parliamentary Committee in response to numerous media reports and complaints from franchisees, this latest inquiry is scheduled as a result of April 2025 sunset provision of the existing Code.
To read the terms of reference for the review, click here. To see the consultation paper which provides more information about the review, and which poses 22 specific questions for consideration, click here. Public submissions into the latest review close on 29 September and can be emailed directly to firstname.lastname@example.org.
Subway $14 billion sale to PE franchise owner confirmed
International sandwich chain Subway which has been on the market since January has sold to American private equity firm Roark Capital Group for USD$9.55 billion (AUD$14.8 billion), according to media reports.
Subway initially retained advisors to explore a possible sale in January 2023. Rising interest rates and uncertain economic conditions have reportedly made valuation of the company difficult and limited the number of potential investors who may have been interested in acquiring the business.
Roark focuses on leveraged buyout investments in middle-market companies, primarily in the franchise/multi-location, restaurant and food, health and wellness, and business services sectors. Roark’s current portfolio of investments include other food franchise brands such as sandwich chain Jimmy John’s and Arby’s, fitness franchise Anytime Fitness, and math learning centre franchise Mathnasium.
The deal is one of the largest fast food transactions in history, and requires Subway’s cash flows to reach certain milestones over two years, otherwise the price drops to USD$8.95 billion, and is still subject to regulatory approvals and final conditions. Subway has more than 37,000 restaurants in more than 100 countries. Read more 1; Read more 2; Read more 3
Gym chain to delist; Shares worth 1% of peak value
Australian-based box gym franchise F45 has announced it will delist its shares from the New York Stock Exchange (NYSE) after two years of public trading, according to a media report.
F45 listed in June 2021 at USD$17 per share but has traded between USD$3.73 and USD$0.10 in the last year, with its average share price below USD$1.00 for 30 days.
The global economic slowdown impacting the ability of potential new franchisees to access investment capital, the failure of F45’s in-house financing option, and, most recently, the company’s halving of revenue projections, have all contributed to the decision to delist from the NYSE. According to a company statement, the delisting will allow the business to focus more on long-term growth without the distraction of stock price movements and short-term financial results. Read more
Food chain profits drop 75%; 200 redundancies announced
Domino’s Pizza Enterprises, which operates Domino’s in Australia, New Zealand and a number of Asian and western European countries has announced a 74.4% decline in net profits for the 2023 financial year, according to a media report.
Global CEO of Domino’s Pizza Don Meij has vowed pizza prices will not be increased in the coming months as customers reel under cost of living pressures
Instead of passing pricing increases onto customers, Domino’s will attempt to cut costs and increase profits by making 20% of global support staff redundant, which will impact approximately 200 workers. Multiple roles will also be assigned to some global leaders, including global CEO Don Meij who will also fill the role of CEO of Domino’s Australia and New Zealand.
Recently, Domino’s announced the closure of 76 underperforming stores, 20 in Australia and 56 globally. Read more
Three dead following franchise drink contamination
Three people have died in the United States after consuming milkshakes purchased from a Frugals burger chain outlet in Washington State (WA.) which were contaminated with listeria bacteria, according to media reports.
Using genetic fingerprinting of bacteria, investigators linked ice cream machines at a Frugal’s outlet in Tacoma, Washington, to six customers who were hospitalised with symptoms of listeria infection, three of whom subsequently died. It can take up to 70 days after initial exposure for symptoms of listeria infection to manifest. The six hospitalised customers were hospitalised between February 27, 2023, and July 22, 2023.
State Health Department officials have investigated Frugal outlets across the states of Washington and Montana, but the Tacoma outlet is the only one where listeria bacteria was found in all milkshake flavours sold and in ice cream machines which were reportedly improperly cleaned. The ice-cream machines were used until August 8, which means it is possible more cases may yet develop. Read more 1; Read more 2; Read more 3
Pizza chain to close all Russian outlets
Domino’s Pizza will shut all 142 of its outlets in Russia and file for bankruptcy after failing to sell the business as a going concern, according to a media report.
The sale of DP Russia, a subsidiary of DP Eurasia which also operates the brand in Georgia, Turkey, and Azerbaijan, has been of little interest to Western-based investors who have distanced themselves from Russia since sanctions were imposed following the country’s invasion of Ukraine last year. American multi-national business and master franchisor Domino’s Pizza Inc. no longer has any affiliation with the Russian business.
At least 1,000 foreign companies have left Russia since sanctions were imposed in February 2022. Most Western fast-food chains which exited the market were taken over and rebranded by Russian operators and it is expected the same will happen with the Domino’s chain. Read more
Matilda’s star launches soccer franchise
Soccer star and Matildas captain Sam Kerr has announced the upcoming launch of her Sam Kerr Football (SKF) franchise, according to a media report.
The franchise will offer a comprehensive training program to children aged between three and 13 which will extend beyond the development of soccer skills to also include health and wellbeing initiatives that help young players achieve their potential. Kerr, who has planned the academy launch for the last two years, intends to develop the program with the support of expert local and international coaches and trainers. Programs are expected to begin in 2024. Read more
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 in two parts on October 16 and 18 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, click here.
New Pizza Hut owner to add burger brand
The world’s largest multi-unit franchisee which recently bought the Australian operations of Pizza Hut for an undisclosed sum will also open more than 200 outlets of American burger chain Wendy’s in Australia by 2034, according to a media report.
Flynn Restaurant Group, which operates fast food brands across 44 states in the US and generates more than USD$4.2 billion in sales will add Wendy’s to its portfolio alongside Pizza Hut as it seeks to rapidly expand its footprint in the Australian market. The company already operates 190 Wendy’s outlets in its home market, as well as nearly 950 Pizza Hut outlets.
The Australian development deal for Wendy’s, which is the third-largest burger chain in the United States, is in addition to Flynn’s plans to substantially increase the footprint of Pizza Hut here following its acquisition from former private equity owner Allegro two months ago, and represents a significant investment in the Australian market. Read more 1; Read more 2
Illegal copy of US food brand opens in Mexico
A burger restaurant, In-I-Nout, has opened in Mexico illegally copying US-based fast-food chain In-N-Out’s décor, menu, and very nearly its name, according to a media report.
The restaurant, in the state of Sinaloa, serves many of In-N-Out’s signature menu items and its interior features Americana décor with red booths and trays and a yellow arrow on its sign, which are all features related to the In-N-Out brand. Read more
Proposed new labour laws to impact franchises
Proposed new legislation related to casual workers being given the right to become permanent employees may impact franchises, according to a media report.
The Federal government’s plan to close a legal loophole that allows employers to double-dip by hiring a long-term employee with regular and consistent hours and patterns of work but not pay entitlements could affect more than 850,000 casual workers. The government’s plan is to legislate that the definition of casual worker is tied to whether regular hours are worked with advanced notice of shifts.
Eligible casual workers may choose to give up their casual loading rates in exchange for sick pay and holiday leave, but they will not be forced to convert from casual to permanent and they will not receive back pay if they do. Small businesses with 15 or fewer employees are exempt from having to proactively offer casual conversions, however many franchise outlets employ more than 15 staff. If passed by parliament, the legislation is anticipated to come into effect in 2024. Read more 1; Read more 2
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