Confusion over franchisees' role in proposed consumer law

A Federal Government discussion paper on consumer law proposes to redefine some small businesses as consumers, creating the possibility that franchisees could be classed as consumers, the Franchise Council of Australia said.

FCA executive director Steve Wright said this was likely to be an unwelcome development for both franchisees and franchisors, who, under the unique terms of franchising, contract with each other, business to business. “There are about 63,000 existing contracts between and franchisees and franchisors. The changes being discussed would create unnecessary and potentially costly confusion without there being any apparent benefit,” Wright said.  

The consumer law initiative flows from a Council of Australian Governments (COAG) agreement to work toward a new national consumer law, to replace existing individual State codes. 

The Franchise Council of Australia, representing the $130 billion franchising sector, supports fairness for consumers. “We believe the majority of the sector’s 1100 franchisors and 63,000 franchisees also support the general thrust of the discussion paper as it applies to fair treatment of consumers,” Wright said. “However, there is a risk legislation could inadvertently trap franchisees. At least, we believe there is a risk of serious confusion if the matter is not clarified.

“What the current discussion proposes could effectively redefine franchisees as consumers.  The FCA does not believe franchisees or franchisors want this to happen."

He said franchisees and franchisors are involved in a business-to-business contract, covered by the Franchising code of Conduct. "The relationship is much more akin to a business partnership than a business-consumer relationship," he added. "To try to overlay a consumer code on top of the Franchising Code is a recipe for costly, unproductive confusion. We need any legislation to be clear that it does not apply in business-to-business relationships, or we need an accompanying memorandum to any legislation which clearly notes that a franchisor-franchisee relationship is not included in the application of the revised law."

This articles appears courtesy of 5 Minute Franchising