HOT NEWS: Franchising Code changes announced - commence March 1, 2008

Changes to the disclosure provisions of the Franchising Code of Conduct arising from last year’s Matthews Report were tabled in Parliament yesterday and will take effect from March 1 next year.

In announcing the amendments yesterday, Small Business Minister Fran Bailey said the changes would enhance the long-term sustainability of the sector, and did not rule out future changes to the Code.

“Prospective franchisees will have more information before signing on the dotted line. This will assist people to make the right decisions before investing large sums of their money in a business,” she said. “My door is always open to advocates for continuous improvement in the franchise industry. I will continue to consult with the franchising sector on how we can make a good industry even better.”

The Minister added that the changes would make the Code more effective, and in what could be interpreted as criticism of the role of the Australian Competition and Consumer Commission (ACCC), said that where there has been illegal conduct against a franchisee under the Code, “there will be no excuse for inaction by the ACCC”.  Read more

Key changes to the Code include:

- An increase from three to four months for the provision of marketing fund audits (Schedule, paragraph 17 (1)(b));;

- Disclosure of materially relevant facts in 14 days (not 60) (Schedule, subclause 18 (1));

- A requirement to list (by name) providers of rebates or financial benefits to the franchisor from the supply of goods or services to franchisees (Annexure 1, paragraph 9.1 (j));

- Other changes consistent with many of the recommendations of the Matthews Report.

A full copy of the Amendment Regulations can be downloaded by clicking here.

A special seminar to be held Friday, August 24 at 12.30pm will update franchisors on the Code Amendments and their effects. This has been jointly organized by the Franchise Advisory Centre and Dibbs Abbott Stillman Lawyers, and will be held at Level 14, 120 Edward St, Brisbane. To RSVP for this event, .

 
Bartercard Australia sold in MBO

Bartercard Australia has been sold to a trio of senior executives in a $25.5 million management buyout supported by a private equity consortium. Bartercard co-founder Brian Hall, managing director Trevor Dietz and chairman Murray D’Almeida secured 75% of the Australian operations of the international barter trade exchange. The buyout follows the privatization last month of London-based parent company Bartercard International.  Read more

US franchisees terminated, jailed for unlawful employment practices

Concerns about the treatment of young or vulnerable workers employed in Australian franchises which have drawn the attention of the Workplace Ombudsman are reflected internationally, with one US-based chain recently terminating a group of franchisees for their employment practices.

Dunkin’ Donuts has terminated the agreements of a group of western Massachussetts franchisees who are alleged to have falsified time records to avoid paying employees overtime, a practice which put them in breach of the “obey all laws” provision of their franchise agreements. The use and treatment of immigrants by franchisees in the United States has also come under the spotlight with a Dunkin’ Donuts franchisee sentenced to 10 months prison after the franchisor tipped-off authorities that the franchisee was illegally recruiting immigrants.  Read more 1

In Australia, the Workplace Ombudsman recently announced it would audit 10,000 fast food outlets and juice bars (many of which are likely to be franchised) and pay specific attention to the lawful entitlements of young employees, as well as the protection of their rights when making workplace agreements. Recent action by the Ombudsman against a non-franchised country motel resulted in the recovery of almost $14,000 in outstanding entitlements, and a $66,000 fine.  Read more 2

Seminars to help franchisors understand and manage their obligations and risks in relation to their franchisees’ industrial relations practices are currently being planned. For notification of details about these events, click here to register your interest.

 
ACCC launches new Franchisee Manual

The Australian Competition and Consumer Commission (ACCC) has released a revised and updated sixth edition of The Franchisee Manual as a valuable reference for people considering buying a franchise. The 38-page manual is free, and available in both printed and electronic formats. Printed copies can be ordered from the ACCC Small Business Helpline on 1300 302 021. Click here to download the electronic version in PDF.
 

RCG cuts King of Knives

Listed multi-brand franchisor RCG Corporation, formerly known as Retail Cube Group, is selling its  45-outlet King of Knives chain, citing “a disproportionate amount of management time for little upside” as the reason for the sale. The business will be sold to a consortium linked to the founders of the chain, who sold it to RCG in 2004. The $4.5 million sale includes the 45 King of Knives stores, plus nine Chef King stores, and follows RCG’s winding back of its Amazing Paints brand last year. RCG will be left with The Athlete’s Foot as its remaining franchise brand, but has announced its interest in future acquisitions.  Read more

Refunds for franchisees of failed Quiznos chain

Franchisees of the sandwich sub chain Quiznos whose Australian master franchisee collapsed last year, will be entitled to a refund of their franchise fees under a court-enforceable undertaking given to the Australian Competition and Consumer Commission (ACCC) last week.  Read more 1

The refunds are believed to be limited to only those franchisees who lodged complaints with the ACCC, which approximates a dozen franchisees according to a report in The Sydney Morning Herald. The total amount to be refunded has not been publicly disclosed, however it is unlikely to cover the full losses of the franchisees involved, some of which are reported to have lost as much as $1.8 million.  Read more 2

The Australian master franchisee of Quiznos has ceased trading and has informed the ACCC that it does not have the funds to meet any claims from its former franchisees, but has made an undertaking to procure funds from “a party independent to Quiznos and the Quizno’s Sub franchise system” to pay the refunds. The identity of the independent party is unknown.

The ACCC alleged Quiznos Australia Pty Ltd had engaged in misleading and deceptive conduct in the sale of its franchises between 2002 and 2006, claiming it was a proven system when it had no track record in Australia, that minimum turnover and cost representations given to franchisees were unachievable, and that the American menu had been “Australianized” when it had not. Concerns have been raised by some observers that entities related to Quiznos Australia are yet to be brought to account for their role in the system’s collapse.  Read more 3

Ironically, Australia’s sole remaining Quiznos store, which had battled-on in suburban Brisbane without the support of an Australian master franchisee, finally changed its name and store livery last week to continue as an independent operation.

 
Former Malaysian PM to become franchisor

Retired Malaysian Prime Minister Dr Mahathir Mohamad, a longstanding supporter of franchising in Malaysia, plans to become a franchisor of a bakery and bistro brand called The Loaf following the opening of its first outlet recently on the resort island of Langkawi. Dr Mahathir, who was once described by former Australian Prime Minister Paul Keating as a “recalcitrant”, has partnered with a Japanese businessman in the new venture. The retired leader championed franchising in Malaysia as a patron of the Malaysian Franchise Association, and through official government recognition and support to encourage the uptake of franchises.  Read more

 
Bendigo and Adelaide Banks to merge

Bendigo Bank has announced it will merge with Adelaide Bank, revealing that discussions with its new partner commenced long before rejecting two recent high-profile offers from the Bank of Queensland. The new combined entity, to be known as the Bendigo and Adelaide Bank Ltd, will have 382 branches across Australia. Analysts surprised by Bendigo’s rejection of the generous Bank of Queensland offers believe that a cultural clash between Bank of Queensland’s owner/manager branch model compared to Bendigo’s community banking model may have been a contributing factor.  Read more

 
RAMS profit forecast & share price hit by subprime loans

Just three weeks after listing on the Australian Stock Exchange, non-bank mortgage lending franchise RAMS has announced a drop of up to 15% in forecast profits this financial year as the cost of borrowing money increases in the wake of the United States subprime mortgage meltdown. RAMS shares were listed at $2.50 last month, but have since fallen to as low as $1.09, and dropped nearly 20% in value on the day it announced its revised forecast. The share drop has lead to some speculation that the mortgage lender could become a takeover target.  Read more

 
Free education seminars for potential franchisees

Free education seminars for potential new franchisees will be held in Brisbane from next week. The seminars on Wednesday August 22 (Fitzy’s Convention Centre, Loganholme) and Wednesday, August 29 (Kedron-Wavell Services Club), will inform participants about what they should know before buying a franchise, what to expect as a franchisee and the Franchising Code of Conduct. The seminars are an initiative of the Australian Competition and Consumer Commission (ACCC) and will be presented by the Franchise Advisory Centre. Franchisors are encouraged to recommend the seminars to their prospective franchisees as part of their research and due diligence process.

For bookings, phone the ACCC Infocentre on 1300 302 502 or the ACCC Small Business Helpline on 1300 302 021.  Read more

 
Poll Results: What do franchisees do after leaving your system?

Two thirds of respondents to last issue’s poll “What do franchisees do after leaving your system?” indicated that ex-franchisees buy a franchise with a different system, with the remaining third indicating that franchisees returned to the workforce.

 
Hobart residents to sink fast food franchises

Hobart residents have petitioned the Sullivan Cove Waterfront Authority to ban fast food franchises from the local area in order to retain the location’s unique atmosphere. Around 1,400 Salamanca locals have signed a petition to ban fast food franchises, which they say will also cause too much competition for local businesses.  Read more

 
Online Poll: Should franchises be banned from “character” towns?

With residents of the Hobart community of Salamanca petitioning to ban fast food franchises from their township, and other “character” locations such as Byron Bay protesting against the intrusion of national and international brands, vote in this issue’s online poll where we pose the question: “Should franchises be banned from “character” towns?” Does the presence of a heavily branded, well-marketed franchise outlet detract from the unique social and cultural characteristics of the Salamancas and Byron Bays of Australia? Have your say and vote now in our online poll.

 
Non-traditional sites fuel Subway growth

New locations in non-traditional sites, such as fuel stations and convenience stores, have helped fuel international growth for Subway, with 628 new store openings worldwide in just four months. Subway is one of the largest franchise systems in the world, and currently has 6,400 outlets in non-traditional locations.  Read more

 
Howards Storage to open in Philippines & Ireland

Howards Storage World will soon be providing storage solutions for customers in Ireland and the Philippines under master franchise agreements announced recently. Read more

 
VIP updates corporate image

VIP Home Services has updated its corporate image, and now includes photographic images of franchisees on its fleet of trailers to better illustrate the brand’s range of services. With 1,000 franchisees in Australia and New Zealand, and an average 22,000 calls from new customers each month, the new image has been designed to make consumers aware of the brand’s full range of services and products.  Read more

 
Fisher & Paykel to move manufacturing to Thailand

Whitegoods manufacturer and franchisor Fisher & Paykel has announced it is moving more of its manufacturing operations away from its home base of New Zealand to Thailand early next year. About 96 electronic circuit board jobs in Auckland will be lost, in addition to 350 job losses announced in April with the relocation of Fisher & Paykel’s washing machine factory, also to Thailand.  Read more

 
Other franchise news:

- Grant Thornton (VIC) changes name to Fordham Wealth Advisors;

- Mortgage Choice busts broking myths;

 
Franchise Appointments & Departures:

Franchise Council of Australia (FCA) chief executive officer Richard Evans has announced his resignation from the FCA, effective from October 19.  Read more

Health Information Pharmacy has appointed Michael Glasson as State Development Manager in Victoria, and Jenny Leung as Business Development Manager in Queensland.  Read more

 
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