ACCC grills franchisors for code compliance

First on the menu – food franchisors

Earlier this year we released an update explaining the findings of a Parliamentary inquiry into the operation and effectiveness of the Franchising Code of Conduct (Code). 

Continuing the crackdown on inadequate disclosure, a recent round of compliance checks undertaken by the Australian Competition and Consumer Commission (ACCC) on a sample of 12 franchisors in the food services sector has identified widespread non-compliance with the Code. 

ACCC marinates on recurrent issues

Inadequate disclosure by franchisors is one of the two most frequent Code issues reported to the ACCC each year.  Key issues identified in the ACCC’s most recent investigations include:

• two thirds of franchisors failed to consistently disclose useful contact details of former franchisees, such as mobile phone numbers and personal email addresses;
• almost 60% of franchisors did not adequately disclose what essential goods were subject to supply restrictions, such as flour for a bakery, or coffee beans for a café;
• one third of franchisors did not sufficiently disclose key unavoidable costs such as wages, rent or inventory; and
• over 40% of prospective franchisees did not get any independent legal, accounting or business advice before entering into a franchise.

The ACCC is now assessing the individual compliance of each food services provider, and will consider whether to take enforcement action.

Time to whip disclosure documents into shape

The report serves as a timely reminder for all franchisors to remain proactive and continuous in their disclosure, and ensure compliance with the Code.  The Code requires most franchisors to review and update their disclosure documents annually, and the deadline of 31 October is fast approaching.

For further information on any of the issues raised in this alert, or assistance or advice on your annual disclosure document updates, please contact our below team.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.