Franchise fears

Australia’s $130 billion franchise sector is nervous that proposed changes to the consumer protection laws will define franchisees as consumers rather than business could place 63,000 franchising contracts in jeopardy.

http:/afr.com
March 30, 2009

Franchise fears
The latest push for changes to consumer protection laws means franchise contracts could be under threat – again.

Australia’s $130 billion franchise sector is nervous that proposed changes to the consumer protection laws will define franchisees as consumers rather than business could place 63,000 franchising contracts in jeopardy.

It is not the first time the validity of franchising contracts has come under fire. The legality of franchise contracts was questioned and taken to the High Court last year after a franchisee refused to pay fees to a franchisor because the franchisor had not confirmed in writing that the franchisees had read and understood the term of the contract. The Franchise Council of Australia suggested that if the courts ruled in favour of the franchisee, thousands of existing contracts in Australia could essentially be deemed invalid.

This latest push for changes to consumer protection law flows from a Council of Australian Governments agreement to work toward a new national scheme to replace individual state codes.

It is a principle the franchise industry generally supports. However, it disagrees with the proposal that the term “consumer” should extend to business-to-business transactions. It also says the banning of standard-form contracts should not apply to franchise agreements.

“The cornerstone of the franchise relationship is the franchise agreement,” the FCA said in a response to a federal government discussion paper on the topic. “The terms of the franchise agreement are by necessity standard forms, as they are designed to ensure consistency throughout a franchise network.”

The FCA says there is a threat the legislation could inadvertently trap franchisees, or at least cause confusion and increase legal costs. Laying a consumer code over the top of the Franchising Code of Conduct is a recipe for confusion and a boost in business for franchise lawyers.

It is no surprise that the franchise sector is concerned about the latest proposed changes. Industry leaders have voice their frustration in the past over the increasing number o industry reviews held by various governments. Last year alone there were three separate inquiries into the way the franchise industry operates. And while these latest proposed legal changes do not put the sector directly under the spotlight, it will affect the way they do business.

http://www.afr.com/home/viewer.aspx?ATL://1237861823235&section=search&title=Franchise+fears


Brought to you by WikidFranchise.org

Risks: Franchise Council of Australia, FCA, Uniform national franchise law means a uniformly weak one, Franchisors push for weak national franchise law, Franchisors want the minimum regulation they can get away with, Franchisees covered under consumer protection laws, Government inquiries into franchise abuse allegations, Government investigations, Excuse du jour, Australia, 20090330 Franchise fears

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License