International Law

Are Australian Franchisors Bullies?

Australian Franchisees call for conduct code change

"Angry franchisees have called on the West Australian Government to independently pass state legislation that works to tighten the Franchise Code of Conduct on the first day of the state?s public inquiry into franchising, saying that existing laws do not protect them from bully franchisors.

Franchisees told stories of intimidation, including threats by franchisors not to renew franchise agreements, and franchise churn ? the repeated sale of franchise outlets that are unlikely to ever turn profits ? at yesterday?s public hearing in Perth.

Franchisors, including Baker?s Delight, which is the subject of an ongoing investigation by the Australian Competition and Consumer Commission into allegations of unconscionable conduct made by New South Wales? franchisee, Deanne de Leeuw, strenuously denied the claims."

Here is the Baker's Delight Franchisee site.

One of the issues is the whether termination requires cause.

"Among the terms of reference for the inquiry is reviewing the adequacy of state and federal laws, as well as whether the provisions governing unconscionable conduct are strong enough to protect franchisees from patterns of conduct that are emerging.

Whether franchisees have sufficient remedies available to them and how laws in Australia governing unconscionable conduct and license renewal compare to other countries is also being examined.

Competitive Foods is calling for a tighter Trade Practices Act that requires a franchisor to show good cause before rejected a renewal."

It is incorrect to inject a concept from employment law, good cause termination, into franchise law.

A good compromise would to allow no cause terminations, but then not enforce the non compete or post termination clauses.

What do you think about this compromise?

Full post as published by Misleading Advertising Law on February 06, 2008 (boomark / email).