| THE LEGAL PICTURE ? |
Many of the telephone calls our consulting firm receives are prompted by potential franchisors seeking information on any legal requirements that might apply to franchising their business. As from the 1st July 1998, the Federal Government has introduced a Mandatory Code of Practice, which is administered by the Australian Competition and Consumer Commission. The ACCC will monitor and enforce this code of conduct and will investigate and deal with breaches of the code in accordance with its enforcement policy and priorities. Therefore, any potential franchisor must strictly adhere to the requirements of the code, which strongly concentrates on trying to level the playing field of information. In the past all franchisors demanded any potential franchisee qualify their interest by filling out an extensive application form but were reluctant to tell potential franchisees much about themselves. The mandatory code requires.
Whilst we agree the Code will help the professionalism of franchising, which is in our opinion, well overdue, it can’t save a fool from himself. A similar Disclosure requirement has been in existence in the "land of franchising" i.e. the United States, for many years, but the level of litigation, initiated by unhappy franchisees, suing for "misrepresentation" does not seem to be on the decline! If you are considering franchising your business, don’t rely on the Code or try hiding behind your Franchise Agreement, but do seek out experts who can explain the "culture of caring" for your franchisees and remember when either franchisor or their franchisees start talking about the franchise agreements clauses, that culture is already in big trouble. Frankly if both parties to the unique franchisor/franchisee relationship are not making money, the franchise agreement probably isn’t worth the paper it’s written on!
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