Australia proposes licensing franchisors

The proposal to license franchisors is contained in the submission by the ACCC (the equivalent of New Zealand’s Commerce Commission) to yet another review of Australia’s Franchising Code, which has been reviewed numerous times since regulation was first introduced in 1998. 

There is no detail in the proposal as to what a franchise would need to do to be granted a licence, although it does suggest that ‘a licence regime could allow an appropriate regulator to make an administrative decision to suspend or cancel a franchisor’s licence when appropriate with the effect that the franchisor could not solicit for new franchisees until the licence is reinstated.’

Jason Gehrke of the Franchise Advisory Centre writes:

‘Under the proposal, the ACCC would impose a range of prudential requirements on a franchisor before they can be licensed to start offering franchises, and which must be maintained in order to continue to offer franchises. If a franchisor’s licence is suspended or revoked, the franchisor would be prohibited from soliciting new franchises until it has met any conditions imposed on it by the ACCC, including providing a mechanism for accessible and binding dispute resolution to manage conflicts between franchisors and franchisees.

'According to the ACCC submission, after more than 25 years of operation, the Franchising Code of Conduct does not provide the Commission with sufficient powers to intervene before or when harm occurs in franchise relationships, but only after the damage has been done.

'The ACCC argues that it, or another government agency, could take more proactive steps to reduce harm to existing and potential franchisees via a government licensing arrangement imposed on franchisors. The ACCC submission also states that a substantially similar outcome could be achieved via the Franchise Disclosure Register, which has been operating for the past year, and which could suspend or cancel franchisors from the Register unless they meet more stringent conditions.'

The proposals are published on the ACCC website here, and acknowledge that there may be insufficient support for a change from the Code to a licensing regime. No public submissions to the Review have yet been posted to the Review’s website.

Unlike Australia, New Zealand has no specific franchise legislation although comparable studies over the last 25 years have shown little difference in dispute levels between the two countries. Australia's recent review was primarily sparked by a series of media investigations, first into exploitation within the 7-Eleven convenience store chain (which does not operate in New Zealand), and then allegations of misconduct within the multi-brand franchisor Retail Food Group (RFG), whose brands are mostly represented in New Zealand by independent master franchisees.