Small Business Ombudsman welcomes Franchising Code reforms

Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson has welcomed the reforms to the Franchising Code of Conduct announced by the Federal Government budget as helping to “level the playing field across the franchising sector”.

Detailed on 1st June and set to come into effect from 1st July 2021, Billson says the reforms will go a long way to addressing the power imbalances that often exist between franchisees and franchisors, particularly when disputes arise.

Bilson advised “these reforms are an important step towards getting the balance right for our small and family businesses in the franchising sector.

“In particular, providing greater powers to my office to appoint an independent arbitrator when both parties agree, will help resolve disputes in a cost-effective and timely manner, while crucially protecting business relationships. This supports a no-surprises, collaborative and mutually respectful commercial relationship between franchisees and franchisors.

“Allowing my office to facilitate group mediation when several franchisees are in a similar dispute with the same franchisor, is another critical reform that will help restore confidence in this sector.

“The changes to the Code mean prospective and current franchisees will be better armed with vital information needed to run their business.

“This includes more transparency around the marketing fund, with an annual financial statement which sets out meaningful information regarding expenditure. Greater visibility around rebates and leasing arrangements will be achieved by these reforms.

“The new mandatory Franchise Disclosure Registry, which is scheduled for release in early 2022, is key to providing prospective franchisees with vital information needed prior to entering a binding franchise agreement.

“Over the past six months my office has fielded over 240 calls from franchisees seeking information regarding disputes under the Franchising Code of Conduct.

“This demonstrates just how critically important it is for prospective franchisees to know exactly what they are getting into before signing on the dotted line.

“Ultimately these much-needed reforms to the Franchising Code of Conduct will play an important role in making Australia the best place to start, grow and transform a business.”

Click here for more information on the Australian Competition and Consumer Commission website.