The Australian Small Business Blog

Saturday, August 12, 2006

Franchising Code of Conduct under Review

The Australian Government will begin a review of the disclosures section within the Franchising Code of Conduct following a series of red flags raised by certain sectors of the franchising industry.

"Over the past few months, a number of concerns have been raised regarding the adequacy of the disclosures section of the Franchising Code," said Fran Bailey, Minister for Small Business and Tourism.

It’s been almost eight years since the Franchising Code was introduced, and comes just months after a recent CPA Australia report titled, ‘When the Franchisor Fails’.

The study claims forty Australian franchisors have ceased trading over the last fifteen years. As a direct result, affecting some 1,090 franchisees and their families and potentially putting 11,500 Australian’s out of the workforce.

"Most people in the franchising sector do the right thing, but given the level of concern, I have decided to review the disclosures section of the Code," said Fran Bailey.

There is some concern that franchisors are not disclosing enough information relating to Directors experience and history.

The disclosures section includes information requirements that franchisors must disclose to prospective franchisees, before deciding to purchase a franchise. The review will consider all available evidence and make any necessary recommendations to improve the Code.

Bill Lockett of Franchise Systems Group believes franchisees should be taking more care before signing any agreement.

“Consumers should be conducting more due diligence before entering into a franchise agreement and should most definitely be investing in an experienced franchise consultant, like myself, to thoroughly explore the opportunity on behalf of the potential franchisee,” said Lockett.

The mandatory Franchising Code of Conduct was introduced in 1998 to improve fair trading in the franchising sector. The Code is supported by the Office of the Mediation Adviser to ensure speedy resolution of disputes.

"Overall, franchising is growing rapidly and an undoubted small business success story," Fran Bailey said.

Today, franchising is an $80 billion industry that employs more than 600,000 Australians.

“As Minister, my goal is to make franchising even stronger tomorrow than it is today."

Jake Challenor is the Managing Editor of I’m Boss TV, Australia’s first online television channel and magazine all about small business.

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