“Power imbalance” in franchising sector must be addressed: ACCC chairman

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By Claire Reilly

SYDNEY, NSW: The Chairman of the ACCC, Rod Sims, has said that there is a “power imbalance” in the relationship between franchisors and franchisees in Australian retail.

Speaking at the Franchising Council of Australia national convention in Melbourne yesterday, Sims said that Australia’s franchising sector has an image problem, and that the ACCC would continue to monitor the industry to preserve the reputation of the sector and ensure that conflicts between franchisors and franchisees were reduced.

“The franchising sector is an important part of the Australian economy, but one that must improve its image to continue to grow,” said Sims. “The ACCC will be doing more in the future to ensure compliance, helping the sector to improve its standing.

“Franchising offers many opportunities to entrepreneurs, young and old, but also many obstacles. The power imbalance in the franchise relationship too often leads to conflict, which is why the ACCC polices the franchising code of conduct.”

The Franchising Code of Conduct was amended in 2010, requiring franchisors to disclose conditions that apply at the end of a franchise agreement (such as the option to renew or extend the agreement, details of exit payments and arrangements for unsold stock). In addition, new powers were granted to the ACCC (under the Competition and Consumer Act) to monitor compliance and investigate breaches by parties involved in franchise agreements.

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“The ACCC will continue to enforce the code of conduct and these new powers will allow the ACCC to do more, earlier, to support best practice in the industry,” said Sims.

ACCC deputy chairman Michael Schaper also attended the franchising convention yesterday, and discussed the role that the ACCC would play in increasing transparency and disclosure in the sector.

“These new powers are designed to reassure potential entrants and existing franchisees that they will be provided with appropriate information from their franchisor throughout their contract,” said Schaper.

“The ACCC will monitor compliance where there is a significant imbalance in bargaining power between industry participants. These new powers will put franchisors on notice to abide by the code of conduct and keep their records in order.

“By ensuring that franchisees are aware of their rights and can access dispute resolution services, the ACCC is playing its part to ensure the franchising sector in Australia strengthens its standing and continues to grow,” he said.