July 9, 2012
The Age
FRANCHISEES have been reminded they are personally liable for their business decisions, even if the advice comes from head office.
The warning comes in the wake of last week’s apology from Brumby’s Bakery, after it attracted criticism for advising its members, via an internal newsletter, to raise their prices and ”let the carbon tax take the blame”.
The Franchise Council of Australia has sent a memo to its members reminding them of their legal obligations, and the dangers of blaming outside factors such as the carbon tax for raising prices if claims could not be proven.
If the Australian Competition and Consumer Commission finds wrongdoing, it can issue warning letters, infringement notices of $6600 or take court action with fines up to $1.1 million.
Franchise council executive director Steve Wright said it was a timely reminder for franchisees that they were considered individual businesses under the law.
”There’s no freedom from obligation – whether you’re the franchisor or the franchisee; the law applies equally to both,” he said.
”Nobody can tell you to do something which is against the law, regardless of what contract you’ve got between two parties.”
Mr Wright said Australia’s franchise sector turned over $128 billion a year and employed 700,000 people. It was ”going pretty well” but facing a decrease in profit margins and an increase in costs.
”By and by it operates in the value price sector of the market, it’s delivering services that are not luxuries,” he said. ”Not to say they’re not doing it tough in retail, as everyone is, on profit margins.”
He said the sector was wrestling with factors such as having to pay more for products and spend extra on shopping centre rents. Those in the construction industry and franchisees ”downstream from high energy consumption industries” were doing it particularly tough.
Mr Wright said there was nothing wrong with putting up prices, but if franchisees were going to blame it on particular factors, they must have good reason.
On the whole, franchisors were usually careful about their advice on such matters, he said.
”I think you’ll find franchisors care a lot about brand recognition, and as a result that’s why the CEO of Retail Food Group (the parent company of Brumby’s) was very quick to get on the front foot and say we don’t condone this, we’re embarrassed and we take it very seriously.”
The ACCC will release details of carbon tax complaints and queries early this week.
Acting chairman Michael Schaper said the watchdog was still looking into the Brumby’s matter.
In general, he said all franchisees should ensure they had access to their own individual legal advice.
”If you’ve got a good relationship with your franchisor, fantastic, your lawyer is going to come back and say it all adds up,” Dr Schaper said.
Small businesses, including franchisees, should also keep themselves informed on the implications of carbon tax and pricing, he said.
For more information, contact the ACCC’s carbon claims hotline on 1300 303 609.
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