WA franchisees set to win rights

"Rogue franchisors continue to undermine confidence in the franchising sector by failing to adhere to industry best practice and by effectively behaving as a law unto themselves,'' Mr Zumbo said.

http://www.perthnow.com.au
October 10, 2010

WA franchisees set to win rights
Russell Quinn

Wendys_Super_Sundaes.jpg

Five WA Wedny's stores have closed in recent months after claims of porr treatment by the franchise owner. Picture: Supplied. Source: AdelaideNow

FRANCHISE laws in WA are poised for change and for some franchisees claiming to have been mistreated and ripped off by parent companies, regulatory change can't come soon enough.

Southern River MLA Peter Abetz will this week introduce a Bill to parliament aimed at boosting the prospects of franchise owners by improving the state's legislation.

Last week, the South Australian Government announced the appointment of a small business commissioner and proposed new laws to protect franchisees when it came to unfair market practices and retail tenancy disputes.

“The Bill I'm trying to bring is basically exactly the same, but we don't have a small business commissioner,” Mr Abetz said, highlighting recommendations resulting from a raft of Federal and State government inquiries into franchising, including WA's Botham enquiry in 2008, that are yet to be implemented.

Among the recommendations are a statutory duty of good faith clause, as well as financial penalties for franchisors who breach the Franchising Code of Conduct.

“No government has acted despite it being key recommendations of these reviews,” Mr Abetz said.

Former WA franchise owner Tim Grigson, who ran a Wendy's ice cream and hotdog store in Warnboro near Rockingham, claimed his treatment highlighted the problems with franchise laws.

Mr Grigson sold his family's Wendy's store in July after purchasing the franchise for about $140,000 in May 2006.

He cited poor treatment by Wendy's, which is owned by Navis Capital Partners - a Malaysian private equity investment firm managing $US3 billion in capital commitments - which purchased the ice cream company for about $40 million in 2006.

“I was thinking being involved in a franchise would be a safer bet as they (the franchisor) had something to lose,” Mr Grigson said.

He claimed Wendy's raised the price of its supplies by 25 per cent for “no apparent reason”, and he was also hit with what he described as inflated rents following privately-held negotiations between the landlord and the franchisor.

“We were just a little pawn and they kept trying to run over the top of us,” he said. “We walked away with a debt bigger than the purchase price.”

Another former franchisee, who did not want to be named, said five Wendy's stores in WA recently closed. They were at Carousel, Fremantle, Belmont Forum, Riverton and Innaloo.

“Three have closed in the last six weeks,” he said.

He said he had been mistreated by Wendy's for a decade.

“The franchisor was price-gouging us, forcing us to buy products far in excess of market rates and of dubious quality,” he said.

“There's been a lot of hardship. Franchisees have lost their homes, their families, everything they own. And it's going to continue to get worse.”

But Franchise Council of Australia executive director Steve Wright said the franchising sector needed policies to stimulate investment and promote growth, not ones that saddled it with more regulation, such as in the legislation proposed for South Australia.

“There is no upside to this legislation. It would be disastrous for franchisors, franchisees and damaging to the South Australian economy broadly,” Mr Wright said.

University of New South Wales franchise law academic Frank Zumbo said the South Australian Government's move to boost franchising laws was to be applauded.

“Rogue franchisors continue to undermine confidence in the franchising sector by failing to adhere to industry best practice and by effectively behaving as a law unto themselves,” Mr Zumbo said.

http://www.perthnow.com.au/business/wa-franchisees-set-to-win-rights/story-e6frg2t3-1225936369663


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Risks: Abuse of business, regulatory & political authority can destroy people, Affordable, early and non-legal dispute resolution mechanism, Appropriate franchise law, Australian state franchise legislation, 2010, Debt traps, Dispute resolution means franchisee goes broke, Franchise Commissioner, Franchise Council of Australia, FCA, Franchisor association not trusted by politicians, Franchisor association not trusted by professional journalists, Franchisor association public relations machine, Franchisors want the minimum regulation they can get away with, Good faith, fair dealings, Gouging on supplies, Head lease advantage, Independent businesses much higher profit than franchised ones, Independent businesses survive longer than franchised ones, Lease controlled by franchisor, Lease margins are an important source of franchisor revenue, Lost homes, Opportunism: self-interest with deceit, Pawns in a game they can't win, Private equity piracy, Rent increase, Risk much higher for franchisee than independent business, Trade association fronts and defends best and worst franchisors, Trade association membership a bogus "Good Housekeeping Seal of Approval", Undue influence, War of attrition, Wild West of the business world, Australia, 20101010 Wa franchisees

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