Taming the " Franchise " Jungle !

The  "Franchising  " industry in Australia is big business.  It employs about 460,000 people in about 88,000 small businesses and has a turnover of $ 144 billion, and until recently it was virtually unsupervised.    New laws now bring it under the watchful control of the Australian Competition and Consumer Commission. ( ACCC ).

"Franchising "is really a way of making money by allowing others to piggyback on a bright idea someone has developed to provide a service by establishing a "name " that brings recognition in the eyes of the public.   Usually, the owner of that named service extracts a fee from others  for the right to trade under that name and enters into an arrangement to promote the service by way of national advertising to attract customers.

Franchising can cover a wide merchandising field - from simple tasks such as mowing lawns to running a chain of hot bread shops.  In it's more advanced form, the owner of the franchise agreement sets up an enquiry hotline and distributes work to franchisees in the various local centres where franchises have been granted.  The person holding the franchise is then provided with a steady source of income without the need to individually seek new business or engage in further advertising.

This can work well - when agreements are entered into in good faith and the rules that apply are clear and fully transparent.  In the past, judgement usually became a matter for the courts and each case involved a complex determination of precisely what was meant in the wording and intent of the franchise agreement.  Arguments were common because many agreements were short on precise details of what was fully intended - and in some cases ended in stalemate and the considerable loss of money for both parties.

The ACCC now had the power to adjudicate and award compensation for broken agreements in the range of up to $8,500 for companies and $ 1,700 for individuals.   In the vast majority of cases, disagreements are over minor matters not fully spelt out in the franchise agreement and which can be quickly settled by the intervention of a totally independent umpire.   It will be up to the ACCC to bring common sense into that decisive process.

There are indications that franchising is entering new territory and widening in scope.   The  "Uber "phenomenon of recruiting private car owners to provide an independent taxi service and the many schemes to make money by providing rooms or in some cases - entire homes for short periods - will see franchise numbers expand exponentially.   It is essential that the legal framework of such franchising be tightened to ensure that it is workable.

The direction in which franchising is heading will also impose added responsibilities on the ACCC.  Some of the new franchising areas emerging may be in conflict with licensing laws that apply to goods and services under either Federal or state law and the ACCC could find itself involved in legal battles that are not of it's choosing.

Those intending to buy into a franchise agreement would be well advised to do their sums carefully - and get competent legal advice before they sign on the dotted line.  Like any successful business, it takes skill and the right attitude to combine with a practical business plan for the venture to prosper - and bring in a living.    At least the ACCC is now involved in steering new entrants over the inevitable rough patches !