Patrick Hatch
21 March, 2018
The Age
A wide-ranging parliamentary inquiry is set to probe the $170 billion franchising industry and examine claims of unfair business models and lax regulation in the scandal-ridden sector.
Nationals senator John Williams lodged the terms of reference for the inquiry by the Parliamentary Joint Committee on Corporations and Financial Services on Wednesday, and it will face a vote on Thursday.
It is understood the inquiry has the backing of Small Business Minister Craig Laundy and is expected to be voted up.
A string a major companies whose franchising models have come under fire over the past two years following investigations by Fairfax Media are expected to be called to give evidence.
This includes 7-Eleven, Domino’s, Caltex, Pizza Hut and Retail Food Group, which owns the brands Donut King, Brumby’s, Gloria Jeans, Michel’s Patisserie, Crust and Pizza Capers.
It is also expected that the Franchise Council of Australia and the Australian Competition and Consumer Commission will be called.
The terms of reference call on the inquiry to investigate the rules and regulations that govern the industry, including the effectiveness of the codes of conduct in ensuring franchisees are given enough information to make fully-informed decisions when considering whether to buy into the industry.
That includes whether they are told the likely performance and worse-case financial performance of their business, their contractual rights, leasing arrangements, and expected running costs – including the cost of goods they have to buy from head office.
The inquiry will also examine the enforcement of breaches of codes of conduct and other laws by franchisors, and restraints put on small business owners after their franchise agreement is terminated.
A series of investigations by Fairfax Media has exposed brutal business models and a power inbalance between franchisees and franchisors, with many small business owners being driven to financial ruin while franchisors make considerable profits.
The inquiry will be due to report in September.
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