In this article, franchise specialist and lawyer Robert Toth takes a view into the future and sees a new franchising world in Australia. Could it ever happen?
We are living in a volatile world where change can occur quickly, just look at Brexit. The world of franchising is also going through constant and significant change.
The Government at different federal and state levels are looking to regulate the industry and address the imbalance between franchisors and franchisees. This occurred to some extent in the revision of the franchise code in 2014 resulting in the 1 January 2015 code changes. Further changes will affect the industry, with the commencement of the Unfair Contracts Act on 12 November 2016.
Imagine a franchise world where:
- Franchisors also have to perform and meet minimum performance obligations.
- Franchisees are able to issue a default notice on the franchisor to remedy deficiencies in their performance
- Franchisees having a right to terminate their agreement in limited circumstances.
- Franchisors having to deliver, on providing products or services at a price better than what can be obtained elsewhere in the market.
- There being no restraints to compete at the end of their franchise term provided the franchisor’s confidential information and intellectual property is protected. This has already been implemented to a degree under the Code.
- Franchisors having to account for their marketing fund spend (this is now required).
- Franchisors not having the power to enforce unilaterally changes and having to act in good faith and for their legitimate commercial interest.
Would these changes to the rights and obligations which even up the balance of power between franchisor and franchisee make it a better franchise world? Would it make franchisors more accountable and sharpen their performance?
Many franchise systems operate to high ethical and professional standards well above that required under the Franchising Code however some do not, and many would have to pull up their socks.
The brave new world
If we remove from the franchise relationship the very things that cause dispute and disillusionment and even up the rights and obligations between the parties would the industry collapse or would it be a better and healthier industry?
Let’s imagine…