Franchising Code reforms to ensure more fairness for franchisees

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The Australian Small Business and Family Enterprise Ombudsman Bruce Billson has welcomed the reforms to the Franchising Code of Conduct announced by the Australian Government, saying that they will help level the playing field for franchisees.

The Ombudsman says that the reforms, which will come into effect on 1 July 2021, will even out the power imbalance that arise in disputes between franchisors and franchisees.

“These reforms are an important step towards getting the balance right for our small and family businesses in the franchising sector,” Billson said.

“In particular, providing greater powers to my office to appoint an independent arbitrator when both parties agree, will help resolve disputes in a cost-effective and timely manner, while crucially protecting business relationships. This supports a no-surprises, collaborative and mutually respectful commercial relationship between franchisees and franchisors.

“Allowing my office to facilitate group mediation when several franchisees are in a similar dispute with the same franchisor, is another critical reform that will help restore confidence in this sector,” Billson added.

“The changes to the Code mean prospective and current franchisees will be better armed with vital information needed to run their business. This includes more transparency around the marketing fund, with an annual financial statement which sets out meaningful information regarding expenditure. Greater visibility around rebates and leasing arrangements will be achieved by these reforms.”

Billson said that the mandatory Franchise Disclosure Registry, scheduled to be released in early 2022, will be an important step in giving prospective franchisees the vital information they need before they sign up to a binding franchise agreement.

“Over the past six months my office has fielded over 240 calls from franchisees seeking information regarding disputes under the Franchising Code of Conduct,” Billson said. “This demonstrates just how critically important it is for prospective franchisees to know exactly what they are getting into before signing on the dotted line.

“Ultimately these much-needed reforms to the Franchising Code of Conduct will play an important role in making Australia the best place to start, grow and transform a business,” Billson concluded.

Franchisees who find themselves embroiled in a dispute under the Code is urged to contact ASBFEO for assistance on 1300 650 460 or email [email protected]