The franchise business model has many advantages for a prospective franchisee, including access to an established brand name, and business support from the franchisor. These advantages are assets to a business operator whether you are an existing business owner or looking to start your first venture.
If you are considering whether to start a new franchise, make sure you give some thought to the tips we have set out below.
In February 2019, the Federal Court found car detailing and cleaning franchisor Geowash Pty Ltd in breach of numerous obligations under the Australian Consumer Law. Geowash was ordered to pay $4.2 million in penalties, including individual penalties of $1.045 million against Geowash’s director, and $656,000 against Geowash’s franchising manager. The ACCC began investigating Geowash in 2015 and subsequently launched legal proceedings when it was deemed Geowash was making false and misleading representations and acting unconscionably towards its franchisees.
In contravention of the Franchising Code of Conduct, both the director and franchising manager were ordered to pay a further $1 million as partial redress to franchisees and were subsequently disqualified from managing corporations in Australia for a period of five and four years respectively. They jointly appealed this decision in 2021.
After years in the making, the Competition and Consumer (Industry Codes-Franchising) Amendment (Fairness in Franchising) Regulations 2021 was passed today, 1 June 2021, which amends the Competition and Consumer (Industry Codes – Franchising) Regulation 2014, commonly known as the Franchising Code of Conduct (Code).
Despite delays, the Government has kept the 1 July 2021 commencement date for the majority of the substantive changes, leaving very little time for franchisors to get their house in order. The new dispute resolution procedure kicks in even earlier, from 2 June 2021.
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