Finally, a clean-up of the franchising industry – is it long overdue?

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A parliamentary inquiry into the franchising industry handed down its report in March.

The report has made 71 recommendations, which if adopted, will see a significant change to how the franchising industry in Australia will operate.

The bipartisan report was damming in its review and called for new laws and greater enforcement powers to the regulator.

The $170 billion industry in Australia has seen significant disputes between franchisors and franchises.

The report described the current regulatory environment as having, “manifestly failed to deter systemic poor conduct and exploitative behaviour and has entrenched the power imbalance”.

The report also found rampant underpayment, unfair contracts and an imbalance of power between franchisees and franchisors are some of the commonly raised issues.

Disturbingly the report drew parallels between the franchising sector and the behaviour uncovered by the Banking Royal Commission.

The report recommends the taskforce examine making unfair contract terms in franchise agreements illegal, investigate options for a public franchise register with franchisors providing updated disclosure documents, and template franchise agreements annually.

It recommended civil penalties if franchisors fail to comply.

The report calls for the ACCC, the Australian Taxation Office and the corporate watchdog, the Australian Securities and Investments Commission, to launch investigations into embattled Retail Food Group, its current and former directors and officers for potential insider trading, tax evasion, quality of audit, directors’ duties and continuous disclosure.

The report called on the government to establish a taskforce to consider and implement the recommendations.

In response Small Business Minister Michaelia Cash said the establishment of an inter-agency taskforce was the first recommendation of the committee.

She said the government had now set up that taskforce and that it would examine the feasibility and implementation of the committee’s other recommendations.

Wondering about the franchising industry and want more help?

At FC Lawyers, our team has years of experience in dealing with franchising matters for both Franchisors and Franchisees. Expert advice is important in this complex area of law and business.

Contact our team of Franchising lawyers today to discuss your legal needs.

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