Following extensive public hearings across Australia, hundreds of submissions, a High Court challenge and several extensions, the Parliamentary Joint Committee on Corporations and Financial Services recently released its findings into the franchise sector. There appears to be, at the core of many of the recommendations, a desire on the part of the Committee to alter the balance of power between franchisors and franchisees.
Given the evidence provided by many franchisees to the Committee this is to be expected and, in fact, may be a desirable outcome as it will remind the industry that its success is driven by the mutual success of all stakeholders in the relationship – including, franchisor, franchisee, landlord, financiers and suppliers. However, in looking to rebalance the franchisor-franchisee relationship, the Committee may have swung the pendulum too far, as what comes through the report is the need for franchisors to underwrite the success of franchisees and that if they do not do so and a franchisee fails, then the franchisor is implicitly at fault or has conducted themselves poorly or even unlawfully. Where this sentiment appears to have driven some of the recommendations in the report, then they are likely to be flawed.
Partners Shaun Temby and Greg Hipwell have written an article that considers 10 of the more contentious recommendations and provide insights into what could be done instead.