SA inquiry MP describes Code changes as “weak and inadequate”

Changes to the Franchising Code of Conduct which came into effect on March 1 are “weak and inadequate” according to South Australian MP and member of the SA franchise inquiry committee Tony Piccolo. In a media release provided to Franchise News & Events, Mr Piccolo criticized the role of the Franchise Council of Australia and claimed that a lack of adequate disclosure and dispute resolution rules in the Code thwarted greater competition and efficiency in the sector.

He said that the inquiry had heard many stories of bullying, intimidation and unethical behaviour by franchisors, and that the SA inquiry will shed light on the “dark corners of the industry and drive the cockroaches out”. More than 1,000 pages of submissions have been received by the inquiry. Read public testimony to the South Australian inquiry by clicking here, then selecting “Current Inquiries”, then “Franchises”.

FCA gains extension to consider funding Ketchell case

The Franchise Council of Australia (FCA) has been given an extension to determine if it will provide funding for the appeal in the High Court of the landmark Ketchell case. The FCA has approached both the Federal Government and the ACCC to support the appeal, as well as its own membership base, with costs expected in the vicinity of $200,000. The FCA says that the case needs to be heard to establish clarity for the sector after the New South Wales Court of Appeal found a franchise agreement to be illegal, where the franchisor (Master Education Services Pty Ltd) had not received a written statement from the franchisee (Ketchell) to state that they had received, read, and had reasonable opportunity to understand the franchisor’s disclosure document and the Franchising Code of Conduct.  Read more

National Retail Leasing inquiry report due this month

Public hearings into the Productivity Commission’s inquiry into the Market for Retail Tenancy Leases in Australia have now concluded, with the Commission’s final report due at the end of this month. Hearings were held in Canberra, Sydney, Melbourne, Adelaide, Perth and Brisbane during February, with presentations made by a range of tenant, landlord and industry bodies. Transcripts of the hearings are available online by clicking here. The inquiry has received a total of 204 submissions, most of which can be viewed online.

The Productivity Commission has also announced a review of regulatory burdens in businesses in the manufacturing and distributive trades sector.  Read more

ACCC updates franchising publications; new Code online

Following changes to the Franchising Code of Conduct which took effect on March 1, the ACCC has updated and re-released all its existing franchise publications, including its Franchising Compliance Manual for Franchisors and Master Franchisees, as well as The Franchisee Manual. These and other franchising publications are available in electronic format from the ACCC website by clicking here.

A complete version of the new Franchising Code of Conduct is also available online by clicking here.

Franchisor’s imaginary representations end in court

Imagine Essential Services, a business services franchise and its CEO Richard Evans were found by the Federal Court last week to have made false, misleading or deceptive representations to its licencees about profitability, number of customers, savings available to customers and membership of professional associations. The action was brought by the Australian Competition & Consumer Commission (ACCC) for breaches of the Trade Practices Act, with court orders restraining Imagine and Mr Evans from making similar representations, and a requirement for the business to undertake a Trade Practices compliance program. The court also required Imagine to publish information about the proceedings on its website, and pay $50,000 towards the ACCC’s costs. Read ACCC release 

Buyer closes the book on Borders purchase

A&R Whitcoulls, parent company of book retailer Angus & Robertson has discontinued its negotiations to buy the Australian and New Zealand operations of US-based rival Borders, stating in a release to the NZ Stock Exchange that “the parties were unable to agree on terms..”’. The company announced that it was still interested in a 100% acquisition of Borders, but that a deal was “unlikely”. The parties had been in negotiation for almost a year, with both the ACCC and its New Zealand counterpart reviewing the sale for its impact on competition in the respective markets. Read more 1  Read more 2

Meanwhile Australian book retailing franchise Dymocks and New Zealand stationery retailer Paper Plus are both reported to have expressed interest in buying Borders.  Read more 3

Fraud franchisor derides franchisees for “make-up tricky action”

New Zealand commercial cleaning franchise Green Power, which is alleged to have sold non-existent cleaning franchises to Chinese migrants, has broken its silence in a letter to dissident franchisees.

The New Zealand Herald reports that Green Power did not hold a planned meeting with the franchisees, but instead wrote to them in faltering English to announce it “…will reserve our rights to against legally to your make-up tricky action..” and warned them to stay away from the company’s head office.  Read more

Code confusion causing compliance concerns

The introduction of amended disclosure provisions to the Franchising Code of Conduct which came into effect on March 1 will provide greater protection for franchise buyers, but has caused confusion among franchisors with the possibility that some amendments may be interpreted differently.

In parallel with the introduction of the Code changes, is the further uncertainty created by the Ketchell case, where the NSW Supreme Court found a franchise agreement to be unenforceable due to a technical breach of the Code. Leave to appeal this case to the High Court has been granted, and may proceed with funding assistance from the franchise sector.  Read more

Duco business misrepresented income: ACCC

The ACCC has commenced proceedings against automotive paint touch-up business Duco Magic for misrepresenting the income that could be earned by its technicians, and for overstating the expected customer demand for its services. The proceedings against Duco Magic, which offers business opportunities around Australia, and its director Warwick Lindsay, have been set down for a directions hearing in the Federal Court in Brisbane later this month.  Read more

Court clears franchisee of blackmailing franchisor

A Tasmanian court has acquitted a former franchisee over an allegation he attempted to blackmail the bakery chain’s chief executive officer. Martin Kelly was acquitted of attempting to blackmail Banjo’s CEO David Dilger, following an allegation he threatened to have the Australian Federal Police press charges against Banjos employees unless he was paid $1.6 million.  Read more

Dog poo franchising takes off in US

Animal waste collection is now one of the new frontiers in the United States to be conquered by franchising according to a recent article in the Wall Street Journal. Primarily servicing dog owners, chains of up to 200 franchisees are being paid to collect dog poo, and have even organized themselves into an association which conducts an annual “Turd Herding Contest” to recognize the best poo collector.  Read more

Dominos increases pizza market slice with Pinky’s acquisition

Listed pizza franchisor Dominos has increased its slice of the market in Victoria, New South Wales and South Australia with the acquisition of the 27-store Pinky’s Pizza franchise chain. The sale for an undisclosed sum adds to the existing 407 stores in Dominos’ Australian network, with a further 287 stores controlled by the Australian franchisor in New Zealand, Belgium, France and The Netherlands.  Read more

Financier pressures defrauded franchisees for payment

Victims of the New Zealand Green Acres franchise scam, who purchased worthless and unauthorized franchises from a rogue master franchisee, are now being pressured by the finance company which lent them the money to repay their loans. Read more

New investors search for gold in Midas; ACCC requests removal of web info

Automotive repair franchise Midas has appointed former Coles Myer CEO John Fletcher as company chairman. Fletcher has invested in the company along with private equity firm Lazard Carnegie Wylie, with the addition of the two new shareholders now positioning the group to “implement an aggressive growth strategy in the Australian market,” according to a company announcement.  Read more 1

Meanwhile the ACCC has asked Midas to remove out of date and inaccurate information about store numbers and growth projections from the Franchise Council of Australia’s website.  Read more 2

NZ contemplates franchise legislation; association membership grows

Members of the Franchise Association of New Zealand (FANZ) met in Auckland last week to consider the prospect of legislation for the sector that may be included in forthcoming changes to the Financial Service Providers Bill. The FANZ was successful in obtaining an extension to lodge a submission to the Bill, allowing it time to consult with members.

Meanwhile membership of the Franchise Association of New Zealand has been boosted by the Green Acres franchise fraud scandal, with three times more members joining in the first five weeks of this year compared to the same period last year. Read more

Economic slowdown may benefit brokers

An economic slowdown coupled with rising interest rates may result in more homeowners reassessing and potentially changing their mortgages, even if the housing market contracts according to Mortgage Choice, an Australian pioneer of franchised mortgage broking.  While some mortgage originators may cease to offer loans through brokers, overall the mortgage broking sector is expected to weather any economic downturn, with the prospect of national regulation also welcomed by the industry. Read more

Other franchise news:

- Allied Brands confirms $7.25million profit guidance for F2008;

- Safety franchise continues to grow;

- Federal Court to determine political fate of former Small Business Minister;

- Betta Electrical teams with Greenfleet to fight global warming; Opens new WA store;

- Sydney police claim Nando’s explosion was deliberate;

- Is the United States talking itself into recession?

- Coffee wars brew for Starbucks;

Franchise Appointments & Departures:

– Made a new staff appointment recently? details to Franchise News & Events (Free service).

Last issue now online:

Missed the last issue? Catch up with recent news from the previous issue of Franchise News & Events, now available online, by clicking here.

Franchise news wanted:

Add Franchise News & Events to your media release distribution list for news about your system. Click here for details of our news requirements. Send all releases to: (Free service).

Subscribe a friend:

Know someone who should also be reading Franchise News & Events? Subscription is free. Just , add their contact details and they’ll be added to the distribution list for future issues.

Franchise Jobs:

Enhance your corporate governance and the strategic capability of your board

Experienced franchisor (200+ outlets & 20+ years experience) with proven strategy development skills available for non-executive board positions. Click here to enquire in confidence, or phone (07) 3716 0400.

 
Do you have a job vacancy in your system and need to get word to potential candidates already working in the franchise sector? details to Franchise News & Events for inclusion in our fortnightly e-bulletin. (Cost applies – Contact us for details).
 

An initiative of the Franchise Advisory Centre

Publisher & Editor: Jason Gehrke

For editorial or advertising enquiries, contact:

PO Box 15304

BRISBANE  QLD  4002

Ph: +61 (0) 7 3716 0400

Fx: +61 (0) 7 3716 0300

www.franchiseadvice.com.au

All content copyright 2008, Franchise Advisory Centre.