New statements by the federal government suggest that
franchisors in breach of franchising regulations could soon face
penalties of up to $50,000.
Cooper Grace Ward released an alert late last year regarding
the Federal Labor government's response to the 2013 Wein review
of the Franchising Code of Conduct (Code). The Minister for Small
Business, Bruce Billson, has since stated that the Coalition
intends to introduce changes to the industry early in 2014 to
'maintain world-class regulatory support for a crucial part of
Billson recently told The Australian Financial Review that the Coalition
would introduce some of the Wein review recommendations. The
Minister noted his concerns with the power imbalance between small
business franchisees and franchisors and stated that 'there are
real pressures in the franchising sector where there's a heavy
dependence [between parties] and it's not an adult-to-adult
The Minister has indicated that the government wants to ensure
franchisors face consequences for breaching the Code;
franchisees have resources to seek remedy for breaches;
the red tape in the industry is addressed; and
a national regulatory framework is established, rather than a
fragmented state-by-state approach, to prevent jurisdiction
shopping and to avoid the current disparity in state-based
The Minister has also suggested that 'serious but less
egregious' breaches of the Code by franchisors may result in
potential fines of up to $50,000, while larger fines may be imposed
for more serious breaches.
Speaking at the National Franchise Convention in October, the
Minister committed to working with the Franchise Council of
Australia in addressing the Wein recommendations and emphasised the
importance of the franchising sector, which contributes $131
billion in economic activity in Australia annually.
The likely effect of any amendments to the Code will be that
franchisors will benefit from having a nationally consistent
regulatory framework but will have to be careful in their dealings
with franchisees to avoid significant penalties.
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